How to invest in emerging markets while avoiding China investment risks

Investors traditionally target emerging markets for higher growth opportunities, and China falls into that bucket.

However, investing in China has always carried risks as the country remains clouded in secrecy, plagued with human rights issues and less transparent with capital markets.

Now, with President Donald Trump in the White House, the relationship between the world’s two largest economies has become even dicier as the two trade barbs on tariffs and rare earth minerals, among other issues.

To avoid the volatility of China, Vanguard has developed a solution to target the largest emerging markets, such as Brazil, India and Taiwan, through its Vanguard Emerging Markets ex-China exchange-traded fund, or VEXC, which simply strips out China.

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“VEXC is an option for investors who seek low-cost index exposure to emerging markets stocks but who may want to avoid companies located in China because of these companies’ unique risks,” a Vanguard spokesperson told FOX Business.

Launched in September, the ETF aims to mirror the FTSE Emerging ex China Index, with over 1,000 companies, including Taiwan Semiconductor and Infosys. The fund, recommended as a long-term investment, is closing in on $50 million in assets, and has returned about 4% since its launch, slightly trailing the 4.9% gain of its benchmark.

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For the year, the FTSE Emerging ex China has advanced more than 26%.

TRUMP, CHINA’S XI HAVE A PHONE CALL, MEETING PLAN

Trump, who runs hot and cold on China, recently held a call with President Xi Jinping, which he described as productive.

“I just had a very good telephone call with President Xi, of China,” Trump wrote in a post on Truth Social. “We discussed many topics including Ukraine/Russia, Fentanyl, Soybeans and other Farm Products, etc. We have done a good, and very important, deal for our Great Farmers — and it will only get better. Our relationship with China is extremely strong! This call was a follow up to our highly successful meeting in South Korea, three weeks ago. Since then, there has been significant progress on both sides in keeping our agreements current and accurate. Now we can set our sights on the big picture.”

Xi has invited Trump to visit Beijing in April, an invitation he accepted.

“To that end, President Xi invited me to visit Beijing in April, which I accepted, and I reciprocated where he will be my guest for a State Visit in the U.S. later in the year. We agreed that it is important that we communicate often, which I look forward to doing,” Trump said.