China’s economy expanded by 5.2% in the second quarter of 2025, slightly better than expected and just enough to spark cautious optimism in global markets. Although the number exceeds the 5.1% economists forecast, according to a Reuters poll, it also represents a slight deceleration from Q1’s 5.4% rate, as cited by CNBC. In short, China’s okay: not booming, not crashing.

But, for ETF investors, the devil is in the policy details.

While the economy overall is well on its way to achieving Beijing’s 5% full-year growth target, Chinese policymakers are temporarily giving themselves a rest from yet another stimulus. That alters the math for investors owning, or considering, China-themed ETFs. Some will flourish in this “wait-and-watch” scenario; others will stagnate until Beijing deploys its next fiscal stimulatory dose.

Let’s dissect the terrain.

Also Read: Nvidia’s China Chip Deal Signals New Tailwind For Chip And AI ETFs

Exports Are Up, And So Are Certain ETFs

Among the quiet heroes of Q2 is China’s export machine. In spite of the geopolitical tensions surrounding it, China was able to increase exports to Southeast Asia by 13%, and exports to the European Union by 6.6%. The numbers suggest strength in China’s position as a global supplier, even with weak domestic demand.

And that bodes well for broad China ETFs such as,

iShares MSCI China ETF (NASDAQ:MCHI): Provides diversified exposure to Chinese firms across industries, such as industrials, consumer discretionary, and technology. The fund is up 2% as of Tuesday’s publication.
iShares China Large-Cap ETF (NYSE:FXI): Tracks the 50 largest Chinese securities listed on the Hong Kong Stock Exchange, which is a more export-sensitive vehicle. The fund was close behind MCHI, gaining almost 2% as of Tuesday’s writing.

Why they’re worth watching: These ETFs may continue to thrive if trade holds up and global supply chains remain fairly stable. If Beijing continues to prioritize helping industry and manufacturing over consumer segments, big caps and exporters may be among the early beneficiaries.

Also Read: Nvidia Growth Estimates Get 10% Boost As US Lifts China Chip Export Curbs: Gene Munster Predicts 30-35% Growth For 2026

Domestic Demand Still In The Doldrums

Although exports were strong, Chinese consumer consumption is still not strong enough. That’s bad news for investors hoping for a recovery in e-commerce, technology services, or discretionary retail.

However, ETFs such as these still have long-term potential:

KraneShares CSI China Internet ETF (NYSE:KWEB): Follows Chinese internet stocks like Alibaba (NYSE:BABA), JD.com (OTCPK: JDCMF), and Tencent (OTPK: TCEHY). The fund gained 4% Tuesday afternoon.
Invesco China Technology ETF (NYSE:CQQQ): Provides access to Chinese technology and communications companies, some of which rely more heavily on domestic consumers than on international trade. The fund was up 3.2% on Tuesday.

The Catch? These ETFs are also more sensitive to domestic demand and confidence. With real estate remaining weak and youth unemployment persisting, consumer spending is likely to remain subdued unless Beijing introduces targeted stimulus measures aimed at households. Analysts are speculating that such action, if it materializes, might be timed for September, CNBC reported.

Policy-Driven Plays

Another route to betting on Chinese stimulus (or not) is through A-shares: shares of mainland Chinese companies listed on exchanges such as the Shanghai and Shenzhen.

Xtrackers Harvest CSI 300 China A-Shares ETF (NYSE:ASHR): Follows the performance of the CSI 300 Index, an index of the 300 largest and most liquid stocks in mainland China. ASHR is particularly sensitive to policy shifts. Any future fiscal support directed at infrastructure, state-owned enterprises, or domestic industries could directly benefit these companies, and in turn, this ETF.

That said, there is a point to note. ASHR tends to respond more quickly to Chinese policy decisions than more internationally exposed ETFs, such as FXI or MCHI. If you're expecting stimulus, this could be your "policy play."

The Stimulus Watch

So far, Beijing has resisted the urge to unleash a major new round of economic support. Some of this caution stems from Q2's relatively stable growth, but it also reflects concerns about long-term debt levels and the effectiveness of past stimulus efforts.

Nevertheless, the pressure is mounting. In its latest report, People’s Bank of China advisor Huang Yiping demanded as much as 1.5 trillion yuan of fiscal stimulus, mainly to lift consumers’ spending.

September is now under the markets’ radar, that is when the next batch of stimulus might arrive if the economic pace is seen to decelerate.

Until that point, ETFs with exposure to exports, industrials with large market capitalizations, or sectors boosted by the recent trade truce (such as rare earths and semiconductors) might be in the driver’s seat.

In April, U.S.-China tariffs jumped to an astronomical 145%, prompting a temporary market panic. By May, however, the two nations negotiated a temporary middle ground. If this detente solidifies into a full-fledged trade agreement by the August 12 deadline, tech-biased ETFs such as CQQQ and KWEB may gain from heightened cross-border flows and reduced regulatory risk.

Final Thoughts

The Q2 GDP surprise buys Beijing some time, and for the time being, that means selectivity is key. One can consider holding onto ETFs with exposure to what’s performing (exports, large caps), but watch domestic-hedged funds that may come roaring back to life if fiscal stimulus arrives later this year.

In China, as in the markets, the next big move is never about the numbers; it’s always about what policymakers do next.

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