Navigate China Market Exposure With Active ETFs

Less than a month ago, the U.S. and China reached a tariff truce and in Geneva, easing the trade aggression between the two countries for a time. However, both countries are now accusing each other of taking actions that violate the truce agreements. This bickering has restarted worries over how tariff negotiations will affect the market. 

These concerns aren’t just limited to traditional U.S. equity strategies, either. Many investors who maintain exposure to emerging markets will have some degree of tilt toward China companies.

This creates a troubling inflection point for emerging markets investors. Will it be worth it in the long run to stay engaged with China, or is it time to divest more from the country? 

Regardless of what investors choose to do, the ETF wrapper can offer a flexible and transparent means for curating an ideal emerging market strategy. For instance, the Avantis Emerging Markets ex-China Equity ETF (AVXC ) can help advisors and investors build emerging markets exposure outside of China. 

An actively managed fund, AVXC looks to chase capital appreciation beyond an index by seeking out companies with low asking prices and high odds of profitability. This fund’s portfolio offers significant exposure to Taiwan, India, South Korea, and Brazil, among others. These countries in particular can offer significant potential for long-term portfolio returns. 

AXVC certainly offers a compelling opportunity. But some investors may wish to remain engaged with China’s companies. Even amid tariff threats, the country remains a key player in the global AI race. This makes China tech companies a particularly attractive option for building growth outside of U.S. equities. Additionally, CNBC reports that U.S. and China leadership will engage in direct conversations soon, which could alleviate tensions between the two countries. 

That said, engagement with China’s market may be best done in a risk-managed manner. Situations like these are where a fund like the Avantis Emerging Markets Equity ETF (AVEM B+) could make a mark. AVEM is an actively managed fund that offers diversified exposure to a variety of compelling emerging markets. 

China remains a crucial holding within AVEM’s assets, amounting to a little over 25% of the fund’s portfolio weight. However, the fund provides crucial diversification by investing in a mix of other countries, including India, Taiwan, and South Africa.

Diversification, along with the flexibility that active management provides, lets AVEM work as a more defensive play for building exposure to China. The fund can still participate in the country’s market rallies, but offers defensive levers to combat tariff volatility.

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