Time To Buy Chinese Stocks? 3 Top Picks For Long-Term Investors

Forbes

07-05-2025

Treasury Secretary Scott Bessent and U.S. Trade Representative Jamieson Greer are traveling to Switzerland on Thursday to meet Beijing's lead economic representative, potentially paving the way for broader trade talks.
Despite ongoing tensions with the U.S. and recent tariff turbulence, Chinese stocks have demonstrated remarkable resilience in 2025. While Western markets have struggled for traction, China's market has delivered impressive gains, leaving many investors wondering: is now the opportunity to increase exposure to Chinese equities?
China has been squarely in the crosshairs of U.S. President Donald Trump's administration, becoming the primary target of the recently imposed "Liberation Day" tariffs. Yet contrary to what many analysts predicted, Chinese shares have proven to be strong performers this year.
The numbers tell a compelling story. The iShares MSCI China ETF (MCHI) has climbed 10.9% year-to-date, while the SPDR S&P 500 ETF (SPY) has declined 6.44%, and the iShares MSCI All-Country World Index ETF (ACWI) has fallen 1.69%. This notable outperformance has occurred despite significant headwinds.
During the recent tariff tensions between April 2 and April 8, the MCHI experienced a sharp 16.5% decline, only to rebound an impressive 14.8% to current levels. By comparison, the SPY fell 12.05% during the same period and has recovered just 10.8%. Two Key Catalysts Driving China's Market
Two significant catalysts appear to be propelling China's market forward in 2025:
First, Beijing has unleashed an impressive array of stimulative measures designed to boost economic activity and support asset prices. These include interest rate cuts, homebuying incentives, banking liquidity injections, a possible stock-stabilization fund, and a comprehensive plan to address hidden local government debt. These policy actions represent a coordinated push to reinvigorate China's economy.
Second, enthusiasm has surged around China's artificial intelligence advancements. Chinese startup DeepSeek recently launched AI models that reportedly rival U.S. counterparts but require significantly less computing power and come at a fraction of the cost. This technological advancement could potentially benefit numerous Chinese companies and trigger a broad market re-rating, particularly in the tech sector.
Chinese companies are increasingly moving up the value-added chain and offering highly competitive products across various industries. While Chinese stocks have maintained attractive valuations for years, these new catalysts may provide the momentum needed for a sustained rally, with Chinese tech stocks potentially having significant upside potential. China's Response to Tariff Pressures
China has previously indicated that fiscal stimulus is on the table and any sign of fiscal support to help offset the tariff impact is likely to be met positively.
Beyond additional stimulus, China has already implemented strategic measures to counteract tariff pressures. The government has allowed the yuan to weaken, effectively incentivizing more exports to offset potentially lower U.S. demand. State-owned funds appear to be providing a price floor by purchasing assets during market dips.
Additionally, China continues to prioritize boosting domestic consumption—a central theme that predated the tariff disputes. During recent policy meetings, Chinese officials announced specific actions to support travel, leisure, appliances, and automobile industries, signaling a commitment to maintaining economic momentum regardless of external pressures.
TIANJIN, CHINA - (Photo by Zhang Peng/LightRocket via Getty Images) LightRocket via Getty Images 3 Top Chinese Stocks To Consider
For investors looking to capitalize on China's market resilience, here are three compelling Chinese stocks that combine strong competitive advantages with attractive valuations for long-term investors: 1. JD.com (JD)
JD.Com Inc is a company principally engaged in the e-commerce business, including online retail and online marketplace mainly through its retail mobile apps. JD.com maintains a strong financial position with approximately CNY 110 billion in net cash as of December 31, 2024. The company is expected to generate positive free cash flow in the coming decade while maintaining its annual dividend policy. After previous concerns about heavy infrastructure investments impacting profitability, management has shifted focus toward growing revenue per user and expanding into lower-tier cities. This strategic pivot should allow JD to maintain positive non-GAAP net margins while improving its overall financial strength. For long-term investors, JD's established logistics network provides a sustainable competitive advantage that continues to deepen as the company expands its reach into China's vast interior markets. 2. Yum China (YUMC)
Yum China Holdings Inc is a holding company principally engaged in the restaurant operation business. The company operates in several segments and significant owners of KFC and Pizza Hut. Yum China presents an attractive opportunity for patient investors. The company is forecasted to deliver a compound annual growth rate of 11% in net unit openings over the next three years, positioning it to exceed 20,000 outlets by 2026. This expansion primarily targets lower-tier cities where chained restaurants have lower penetration. Despite ongoing macroeconomic challenges, rising disposable income and evolving family dynamics support projections of approximately 1% annual growth in comparable store sales over the next several years. Long-term investors will appreciate Yum China's proven ability to adapt Western fast-food concepts to local tastes while maintaining operational excellence across a vast market. 3. Tencent Holdings (TCEHY)
Tencent Holdings Ltd is an investment holding company primarily engaged in the provision of value-added services (VAS), online advertising services, as well as FinTech and business services. Tencent maintains a robust financial position with significant net cash and strong free cash flow generation capabilities, even during previous game approval halts in 2018 and 2021. The company is currently investing in artificial intelligence chips for generative AI development, supported by its healthy balance sheet. Tencent's investment portfolio exceeds CNY 900 billion, even after divesting shares in companies like Meituan and JD, providing substantial financial flexibility. For long-term investors, Tencent's ecosystem of social media, gaming, fintech, and cloud services creates multiple avenues for sustainable growth as China's digital economy continues its expansion. The Bottom Line
While risks remain—including ongoing U.S.-China tensions, regulatory uncertainties, and macroeconomic challenges—Chinese stocks offer compelling value propositions in the current market environment. The combination of government stimulus, technological advancements, and company-specific strengths creates an attractive setup for long-term investors willing to weather some volatility.
BEIJING, CHINA - JANUARY 15: (Photo by Mark Schiefelbein - Pool/Getty Images) Getty Images
The upcoming diplomatic meetings in Switzerland between Treasury Secretary Scott Bessent, U.S. Trade Representative Jamieson Greer, and China's Vice Premier He Lifeng may signal a potential thaw in relations that could benefit Chinese equities. While the immediate outcome remains uncertain, any progress toward stabilizing the trade relationship would likely provide additional support for Chinese markets.
For those looking to add Chinese exposure to their portfolios, focusing on companies with strong competitive advantages, healthy balance sheets, and alignment with government priorities may prove rewarding. The three stocks highlighted represent opportunities where fundamentals and valuations appear particularly favorable for investors with a long-term horizon.
Disclosure: The author does or has held positions in the stocks mentioned. The views expressed in this article are solely the author's opinion and should not be taken as investment advice.