Chinese stocks have long been a polarizing topic in the investing community. On one hand, China is the world’s second-largest economy and the driving force behind global manufacturing and trade.
On the other hand, Chinese financial regulations and auditing are much more relaxed than those in the United States and Europe. As a result, this has led to many investors being burned by Chinese companies falsely reporting financial information.
So, here is the age-old question: Should you invest in Chinese stocks? In this article, I will tackle the red-hot topic of investing in Chinese stocks and focus on the positives and negatives they can add to your portfolio.
What Are Chinese Stocks? (Introduction)
It’s certainly a controversial subject for investors. Some investors will never touch Chinese stocks after what happened with companies like Luckin Coffee. What happened with Luckin Coffee?
They fraudulently reported fabricated annual sales worth more than $300 million, which were provided to shareholders to boost the price of the company’s stock. Luckin was quickly delisted from the NASDAQ exchange in the United States when it was uncovered.
There have been other instances of US-listed Chinese stocks that have burned investors. Most recently, Chinese tech stocks took a multi-year nosedive after the government issued a regulatory crackdown that limited sector growth. Much of this happened after Alibaba founder Jack Ma was publicly critical of the Chinese government.
The elephant in the room with Chinese stocks is how involved the government is with businesses. Even though publicly traded, many companies are still partially or completely owned by the Chinese government.
Beijing has an extraordinary influence over how businesses operate compared to most other countries. Of course, when these companies trade publicly, any sudden government interference could make a stock’s price tumble.
Financial auditing regulations are much looser in China, although the country has been trying to tighten these regulations in recent years.
Still, compared to the United States, companies are not regulated by such strict policies. And therefore, there is always the potential for a higher rate of fraudulent reporting.
Deepseek and the Race for AI Dominance
Those who follow the markets regularly will likely remember the disruption we saw at the end of January after a report about China’s ChatGPT rival, DeepSeek. While most major tech companies have been producing their Large Language Models or LLMs, DeepSeek was unique because of how little it allegedly cost to run.
Investors were initially spooked that big tech companies were wasting billions in CAPEX; it turned out that DeepSeek was using just as many NVIDIA GPUs as any other company. Here is another example of being cautious about reports that surface outside China.
In the end, the threat of DeepSeek came and went with little long-term impact on these stocks. Still, the lingering threat of China overtaking the United States in a sector like AI was enough to sound the alarms on Wall Street, even if just for a few sessions.
Is DeepSeek a viable threat to companies like Google or Meta? As of now, no. The company was using NVIDIA GPUs but was not disclosing them because of the trade sanctions against China for high-end chips.
Remember, with the markets, investors and institutions sell before finding the facts. Usually, these fear-based sell-offs make excellent opportunities to buy stocks at a temporary discount.
What Is an ADR Stock?
You will certainly come across the term ADR stock when researching US-listed Chinese stocks. What is an ADR stock? ADR stands for American Depository Receipt and is a stock that trades on US exchanges and represents shares of a foreign-owned company.
Since most companies want to be traded on the US stock market, they allow American investors to have exposure to their stocks through ADR listings.
Sponsored ADRs and Unsponsored ADRs are the two different types of ADRs: Sponsored ADRs have the participation of the company the stock represents. A bank or other financial institution issues unsponsored ADRs without the involvement of the underlying company.
ADR stocks are usually issued by banks that hold the real shares of the foreign company. They can be listed on any US exchange or Over-the-Counter (OTC markets.
The price of the ADR stock is based on the price of the foreign stock as it trades on its home stock market. They are listed in US dollars and can even pay dividends to US shareholders!
Best Chinese Stocks 2026
If you are still reading this article, you’ve realized all the risks of investing in Chinese stocks. While there are some land mines, China is also home to some of the world’s biggest and best companies.
With regulations improving and more information available about Chinese companies, it’s as good a time as any to add some exposure to your portfolio. Here are my choices for the best China stocks to buy in 2025.
Alibaba Group Holding Ltd (NYSE: BABA)
Alibaba is one of the best-known Chinese companies that trades in the US market as an ADR. It is a company that operates in a long list of sectors, including e-commerce, gaming, cloud computing, and various media mediums.
Jack Ma, a well-known Chinese billionaire and philanthropist, started Alibaba in 1999. It is best known for its eCommerce platforms like Tau Bau and AliExpress, AliPay mobile payment system, and a super app.
It wasn’t until 2014 that the US market listed Alibaba as an ADR. Alibaba’s IPO on the NYSE was the largest in history, debuting with a market cap of over $230 billion.
The company’s native stock trades on the Hong Kong Stock Exchange and the Hang Seng Index. Add them to your Chinese stocks list.
Tencent Holding (OTC: TCEHY)
Next on the list of Chinese stocks is Tencent. They may not be as recognizable as Alibaba, but it is the largest company in China in terms of market cap.
As you can tell from its ticker, Tencent’s ADR trades on the Over-the-Counter markets in the United States. Despite this, TCEHY stock is a sponsored ADR. It was the first Asian company to cross a market cap of $500 billion, and its current valuation is over $600 billion.
Like Alibaba, Tencent operates in a variety of different industries. It started as a gaming company in 1998 and is the world’s largest game developer by market cap.
Tencent owns or is a major investor in multiple game studios, including Riot Games, Grinding Gear Games, Super Cell, Epic Games, Garnea (Sea Limited), and Ubisoft.
It was also an early investor in companies like Sea Limited, Tesla, and JD.com. Perhaps Tencent’s largest and most widely used product is its WeChat super app, which combines a chatting service and mobile cashless payments in a single ecosystem.
PinDuoDuo Holdings Inc (NASDAQ: PDD)
PinDuoDuo is one of the more interesting ADR companies in which you can invest. As you can see, PinDuoDuo trades on the NASDAQ exchange in the United States as an ADR.
It is also a component of the NASDAQ-100 index, which tracks the 100 largest companies that trade on the NASDAQ exchange. PinDuoDuo was founded in 2015 and started as a marketplace for agricultural products, allowing Chinese farmers to sell directly to consumers.
In the United States, you are likely more familiar with PinDuoDuo’s non-agricultural online marketplace, Temu. PinDuoDuo founded the Temu site in September 2022.
It has expanded to more than 80 countries worldwide and has nearly 300 million active users. With a market cap of $172 billion.
BYD Ord SHS H (OTC: BYDDY)
We can’t discuss Chinese stocks and companies without mentioning the electric vehicle industry. China is the biggest auto market in the world and has more than 200 electric vehicle makers.
Few are large enough to go head-to-head with the global leader in EVs, Tesla. One of the EV makers that can compete with Tesla is China’s largest EV maker, BYD.
BYD is one of the largest EV makers in terms of production and vehicle deliveries. The company started as a battery maker in 1995 but has since evolved into an automaker and a manufacturer of other vehicles, such as forklifts and rail transit.
BYD’s stock is listed on the OTC markets in the United States and the Hong Kong and Shenzhen stock markets in Asia.
Final Thoughts: Chinese Stocks
When investing in Chinese stocks, you must weigh your investment strategy and risk appetite. Most large Chinese companies are safe, but smaller ones have risks. Even the large tech companies aren’t immune to the reach and temperament of the Chinese government.
As we have seen over the last few years, regulatory crackdowns have resulted in negative growth for companies like Alibaba and Tencent. Only now are these companies and their stocks showing signs of recovery.
Had you been invested in these stocks rather than American tech stocks, you would have missed one of the biggest two-year bull markets in recent memory.
