The United States is not the only market advisors should be keeping a close eye on right now. China is home to the second largest economy in the world. It may not be as large as the U.S., but what happens to China’s economy and markets can lead to ripple effects across a number of different investment strategies.
It should go without saying that ongoing tariff tensions with the U.S. are causing conditions to shift in China’s market and economy at large. However, the country is no stranger to navigating its way through tariff negotiations.
Recently, members of the American Century Investments team put out an insights piece breaking down the state of play for China’s economy. Despite the country’s reputation as an exporter, the American Century article explains that the government is taking steps to amplify domestic demand. This includes legislation for local employment subsidies, paid annual leave, and an attempt to stabilize its stock market and real estate market, among others.
“China boasts the world’s second-largest consumer market,” American Century noted. “If the government’s efforts are successful, increasing demand could benefit China’s homegrown companies and foreign businesses that sell everything, from household appliances to luxury goods, to Chinese consumers.”
It’s far too early to see how these initiatives will play out down the line. Domestic demand could help foster momentum for China companies, or tariffs could end up taking a bite out of profits. As such, it could very well pay off to approach China investing through a diversified approach.
Approaching China Momentum Through AVEM
For instance, take a look at the Avantis Emerging Markets Equity ETF (AVEM ). The fund approaches emerging markets through a diversified angle to curate capital appreciation.
AVEM invests in equity securities across the cap spectrum, with a notable focus on companies with lower valuations and high profitability ratios. This diversified strategy extends to how the fund weighs its exposure to individual companies.
Among all the emerging markets AVEM invests in, China holds the largest weight in its portfolio. As of May 31, 2025, the fund holds about 28% of its weight in China equities. However, the fund also invests in other countries, such as South Korea, India, and Taiwan. This diversified approach lets AVEM participate in China’s economic rallies, but isn’t beholden to them.
AVEM’s strategy has set the fund in pole position regardless of how China’s economy performs. If the domestic demand ramps up, the fund can ride a new wave of momentum. However, even if things get dire for China, investors can turn to AVEM to find routes to success through a variety of other emerging markets.
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