How to Invest in China Stocks from India

As an Indian investor, looking at China can feel both exciting and intimidating.

The world’s second-largest economy is a natural diversification play beyond the U.S., with growth stories you won’t find at home, from tech giants like Alibaba and Tencent, to EV leaders such as BYD, to entire sectors like renewables, manufacturing, and infrastructure that power global supply chains.

But the “how” matters. Do you get Chinese exposure through US-listed ADRs, European ETFs, or Hong Kong shares? And what about all those tax acronyms that follow?

This blog breaks it all down. We’ll walk through the practical routes Indian investors actually use, the tax layers involved, and which platforms make sense for you.

Table of Content

• Can Indians Invest in China?
• Way 1: US-listed ADRs
• Way 2: US-listed China ETFs
• Way 3: Hong Kong listed H-shares
• Way 4: UCITS
• Way 5: India-domiciled options
• Taxation: How Your Returns Are Treated in India
• Platforms that help Indians invest in China
• Conclusion
• FAQs

Can Indians invest in China?

Yes, but not directly.

Mainland Chinese A-shares are restricted, so Indian investors cannot simply open a brokerage account in Shanghai or Shenzhen. Access happens only through international exchanges and fund structures.

In practice, Indian investors typically use five practical routes, which broadly fall into two categories:

1. Direct Routes: These give you ownership in offshore-listed Chinese securities, whether in the form of individual stocks or baskets.

• US-listed ADRs
• US-listed China ETFs
• Hong Kong–listed H-shares (and Stock Connect)

2. Indirect Routes: These give you exposure via fund structures domiciled outside the US or India:

• UCITS China ETFs (LSE/Xetra)
• India-domiciled funds (feeder and direct)

The next sections break each of these down in detail: how they work, the pros and cons, and which type of investor they suit, whether retail, mass affluent, HNI, family office, or institutional.

1) US-listed ADRs

ADRs, or American Depositary Receipts, are certificates issued by US banks that represent shares of foreign companies. Many leading Chinese firms such as Alibaba, JD.com, Baidu, and Pinduoduo issue ADRs that trade on US exchanges like the NYSE and NASDAQ.

Instead of buying Alibaba shares in Hong Kong (ticker: 9988 HK), an Indian investor can buy Alibaba’s ADR (ticker: BABA) on the NYSE. The ADR’s price is designed to closely track the underlying stock in its home market, adjusted for the ADR conversion ratio.

Key points:

• You don’t directly own the stock, you hold a US bank–issued receipt backed by the underlying shares.
• Dividends, if declared, flow from the company → custodian → depositary → you. Along the way, taxes and small depositary fees apply.
• For Indian residents, buying ADRs counts as an overseas securities investment and must be routed under RBI’s Liberalized Remittance Scheme (LRS).

Pros:

• Exposure to leading Chinese companies without needing a Hong Kong account.
• Easy access via US-focused investment apps commonly available in India.
• High liquidity in major names like Alibaba, JD.com, and Baidu.
• Traded in USD during US market hours (convenient if you already invest in US stocks)

Cons:

• Must route through LRS (paperwork, TCS, and the annual USD 250,000 cap).
• US dividend withholding tax of 25%, plus dividend income taxed at your slab in India.
• Estate tax risk: US imposes estate tax of up to 40% on US-situs assets (including ADRs) above USD 60,000 for non-residents.
• Smaller ADRs can face thinner liquidity.
• ADR delisting risk if US-China tensions flare.
• Small but real depositary bank fees (typically $0.01–$0.05 per ADR annually).

2) US-listed China ETFs

Exchange-Traded Funds (ETFs) are pooled investment vehicles that track an index or a basket of securities. Several ETFs listed on US exchanges focus on Chinese equities, giving Indian investors exposure to China without buying individual ADRs or Hong Kong stocks directly.

Examples include:

• KWEB (KraneShares CSI China Internet ETF): focuses on internet and tech companies like Alibaba, Tencent, JD.
• MCHI (iShares MSCI China ETF): tracks large and mid-cap Chinese equities.
• FXI (iShares China Large-Cap ETF): covers 50 of the largest Chinese stocks.
• ASHR (Xtrackers CSI 300 China A-Shares ETF): provides access to mainland China A-shares via Stock Connect.

Key points:

• ETFs are US-domiciled funds that hold baskets of Chinese stocks (via ADRs, H-shares, or Stock Connect).
• You own ETF units listed and traded on NYSE/NASDAQ in USD.
• Easily investable through US-focused apps and brokers in India
• One ETF unit gives you exposure to dozens of Chinese companies instead of buying individual ADRs.

Pros:

• Broad exposure to the Chinese market through a single trade.
• High liquidity in flagship ETFs like KWEB, MCHI, and FXI.
• Lower company-specific risk compared to holding one ADR.
• Easy to buy through US-focused apps, same as ADRs.
• Suitable for thematic allocations (internet, A-shares, large-cap).

Cons:

• Must route through LRS (paperwork, TCS, and the annual USD 250,000 cap).
• Dividend withholding tax: US withholds 25% on ETF distributions, which are then taxed at your slab in India.
• Estate tax risk: US estate tax of up to 40% on US-situs assets (including ETFs) above USD 60,000 for non-residents.
• Exposure limited to what the ETF includes (may not cover small/mid-cap names comprehensively).
• The ETF structure adds an extra layer of costs (expense ratios, typically 0.5%–0.7% for China-focused ETFs).

3) Hong Kong–listed H-shares (and Stock Connect A-shares)

H-shares are shares of Chinese companies incorporated in mainland China but listed and traded on the Hong Kong Stock Exchange (HKEX). These shares are denominated in Hong Kong Dollars (HKD) and are open to international investors.

Through Stock Connect - a cross-border trading link between Hong Kong and mainland China, international investors using Hong Kong brokers can also access a selected set of Shanghai and Shenzhen A-shares. This makes Hong Kong not only a hub for H-shares but also the main gateway to China’s onshore equity markets.

For example, Industrial and Commercial Bank of China (ICBC) and PetroChina issue H-shares that trade on HKEX. Many Chinese tech giants like Tencent and Alibaba also have Hong Kong–listed shares that trade alongside their US ADRs.

Key points:

• You directly own the Hong Kong–listed shares, denominated in HKD, rather than a US-issued ADR.
• Indian residents can buy H-shares through global platforms like Paasa, which provide access to HKEX.
• Trading H-shares involves Hong Kong stamp duty (0.10%) plus other levies (SFC, AFRC, trading fee) on each side of the transaction.
• Hong Kong does not impose withholding tax on dividends, but if the company is PRC-incorporated, China’s 10% withholding tax may still apply at source.

Pros:

• Direct exposure to Hong Kong–listed shares (no ADR or depositary bank layer).
• No US estate tax risk, since HKEX securities are not US-situs assets.
• No Hong Kong withholding tax on dividends (only PRC WHT may apply).
• Wide choice of companies, including financials, energy, and tech.
• Access to Stock Connect, which lets foreign investors buy selected mainland A-shares via Hong Kong brokers.

Cons:

• Must route through LRS (paperwork, TCS, and the annual USD 250,000 cap).
• Requires currency conversion into HKD (extra FX spread and transfer cost).
• Time zone mismatch: trading happens during Hong Kong market hours.

4) UCITS China ETFs on LSE/Xetra

UCITS China ETFs are Europe-domiciled funds that give investors exposure to Chinese equities while being regulated under the UCITS framework. They trade on exchanges such as the London Stock Exchange (LSE) and Xetra (Germany), and are built for international investors.

For Indians, UCITS ETFs are often the cleanest and most tax-efficient way to invest in China. They sidestep US estate tax, typically have lower withholding tax drag, and offer access to a wide menu of China strategies, from broad MSCI China indices to more focused A-share or sector-specific themes.

Examples:

• iShares MSCI China UCITS ETF – tracks large and mid-cap Chinese equities.
• Xtrackers MSCI China UCITS ETF – another broad China tracker.
• Lyxor Hwabao WP MSCI China A UCITS ETF – focused on A-shares.
• iShares China CNY Bond UCITS ETF – fixed income exposure.

If you want a detailed explanation of UCITS and why they matter, we’ve written a full guide here: Why Indian Investors Should Choose UCITS Over US ETFs.

Key points:

• Ireland or Luxembourg domiciled ETFs, regulated under UCITS. Traded on LSE/Xetra in USD, GBP, or EUR.
• Requires a global platform like Paasa. Most India-focused, US-only apps don’t provide UCITS access.
• Ireland generally does not levy withholding tax on dividends to non-residents. Underlying Chinese dividends may face 10% PRC WHT at the fund level. In India, dividends are taxed at slab; capital gains are taxed at 12.5% (LTCG if >12 months for listed units, STCG at slab).

Pros:

• No US estate tax risk: safer for HNIs and family offices with large allocations.
• Broader menu of China strategies (beyond what’s available in US ETFs).
• Generally lower withholding tax drag compared to US ETFs.

Cons:

• Must route through LRS (USD 250,000 annual cap, paperwork, TCS above ₹10 lakh).
• Trading in GBP/EUR/USD means extra FX conversion costs.

5) India-domiciled options

Indian mutual funds and ETFs give investors a way to access China without sending money abroad. These are SEBI-regulated products, denominated in INR, and available through regular Indian brokers or MF platforms.

Some schemes track Chinese indices directly (like the Hang Seng), while others are structured as feeder funds — meaning the Indian AMC collects money in INR and invests it into a global “master fund” abroad that holds Chinese equities. For the investor, it feels no different from buying any other mutual fund in India.

Examples:

• Nippon India ETF Hang Seng BeES – tracks the Hang Seng Index in Hong Kong.
• Edelweiss Greater China Equity Off-shore Fund – feeder fund investing in JPMorgan’s Greater China Fund.
• Axis Greater China Equity FoF – feeder fund investing in Schroder International’s Greater China strategy.

Key points:

• You own units of an Indian MF/ETF in INR. The AMC then takes care of the offshore exposure.
• Easy to buy through India-focused platforms or any MF distributor. No LRS paperwork, no foreign broker account needed.
• SEBI caps the industry’s total overseas exposure (USD 7 bn for MFs, USD 1 bn for ETFs). When the limit is reached, AMCs may pause fresh subscriptions.
• These funds don’t qualify as Indian equity. Gains are taxed under the new uniform regime (LTCG at 12.5% if held >12 months for listed units; STCG at slab rate).

Pros:

• Easiest way for Indians to get China exposure (denominated in INR).
• No LRS paperwork, no TCS deduction.
• No estate tax or foreign tax credit filings.

Cons:

• Dependent on SEBI’s overseas investment cap; inflows can be paused.
• Limited product shelf: only a handful of China-focused funds exist.

Taxation: How your returns are treated in India

When investing in China through offshore routes, investors face two layers of taxation:

1. Foreign-side taxes: withholding tax (WHT) on dividends, capital gains tax (if any), and estate tax exposure in the country of domicile.
2. Indian taxation: how those dividends, interest, and capital gains are taxed when you file your return in India.
   The interaction of these two layers determines your net outcome. Below is a structured comparison across the five practical routes.

Foreign-side taxes

Note: China’s tax law applies a 10% withholding tax on dividends paid by companies incorporated in the People’s Republic of China (PRC).

Indian taxation

Assuming you are a resident individual in India (FY 2025–26 rules):

If you are already investing in China, or are considering it and need clarity on how taxation applies to your situation, you can reach out to us at support@paasa.com

Our team works closely with HNIs, family offices, and institutional investors, and we have developed deep expertise in navigating the nuances of cross-border taxation, compliance, and reporting. We can help you understand the implications in detail and ensure your global investments are managed with the right structures in place.

Platforms that help Indians invest in China

While the investment routes are clear, access depends on the platform you use. Below is a comparison of commonly used platforms by Indian investors, showing which China routes they enable and what additional services they provide.