Trade tariffs? Why you should still invest in China

In spite of economic unease and geopolitical headwinds, China remains a treasure trove of halal investments.

It feels like a déjà vu. With Donald Trump back at the helm, it is the US versus China all over again. The new US administration has so far hit China with an additional 10% tariff, on top of existing restrictions and bans.

But this time around China is more prepared. Policymakers have been prodding the domestic economy, and businesses diversifying away from the US. Increased innovation has been another by-product of adaptation.

For Muslims, there are enough reasons to invest (and stay invested) in China where many big, high-profile companies are Shariah compliant. This Buy thesis is backed by the stable domestic market and booming export industries.

Photo by Aston Yao on Unsplash

China’s Resilience and Viability

1. Policy measures: With an understanding that the economy is slowing and needs an internal boost, China has been pushing policy interventions to promote consumption. The economic stimulus measures started in 2024 are getting an upgrade this year: a looser monetary policy in addition to a slew of subsidies and increases to salaries and pensions.

2. Strategic focus: Alongside supportive economic policies, the government is driving initiatives to grow key industries that are benefiting from global secular demand trends. These include artificial intelligence, electric vehicles (or new energy vehicles in China), renewable energy, semiconductors, advanced manufacturing and healthcare.

3. Globalisation ex-US: Given the uncertainty around trade relations with the US in recent years, there has been a concerted effort among Chinese exporting companies to switch out the US for more stable external markets, particularly the ASEAN (i.e., Southeast Asia) — now the biggest trading partner — and the European Union (at number two).

China’s Halal Investment Options

The government’s goal of innovation-driven development aligns neatly with China’s dominance in high-technology exports. Hence the most promising investment candidates are found in the same space. Here are a few prominent Shariah compliant examples, leaders in their respective sectors.

• Alibaba Group (HKEX:9988) (NYSE:BABA)

Known for its e-commerce business, Alibaba is probably China’s biggest digital exporter, led by AI-integrated cloud computing services and logistics platforms. (Its own AI model, Qwen, apparently outperforms DeepSeek.)

• BYD Company (SZ:002594) (OTCPK:BYDDF)

Fast-growing BYD is now the top global producer of electric vehicles, ahead of Tesla. Despite some pushback on Chinese auto imports from Western markets, the company has been expanding at an impressive rate.

• Geely Automobile (HKEX:0175) (OTCPK:GELYF)

Chinese automaker Geely is smaller than BYD in scale but has a wider lineup of vehicles, from hybrids and EVs to traditional internal combustion engines, under several brands, including Volvo, Polestar and Geometry.

• Xiaomi Corporation (HKEX:1810) (OTCPK:XIACF)

Xiaomi, the third biggest smartphone firm globally, is the latest entrant to the crowded EV space. But its first ever model has already made a splash, thanks to brand trust, ecosystem integration and competitive pricing.

• Contemporary Amperex Technology Co Ltd (SZ:300750) (OTCPK:CTTLY)

Many premium Chinese EV models use locally sourced lithium-ion batteries from Contemporary Amperex Technology (CATL). Known for its cutting-edge technology, it the largest battery manufacturer in the world.

• Midea Group (SZ:000333) (HKEX:300)

Midea is another Chinese business to have succeeded on the global stage. With export-oriented operations in more than 200 countries, it is among the top makers of home appliances.

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Notable mentions to go Meituan (HKEX:3690) that is China’s largest delivery platform; PDD Holdings (NASDAQ:PDD) which hosts an online social shopping platform; maker of server processors Hygon Information Technology (SZ:688041), AMD’s partner of choice; and Luxshare Precision Industry (SZ:002475), a big supplier of cables and connectors for the electronics industry.

Takeaway

After decades of “high-speed growth”, China is switching decisively to “high-quality growth”. Tech industries, propelled by rapid innovation, have been driving this growth and sustaining, as a result, the broad economic growth targets.

The unique ability of Chinese makers to combine innovative technology with attractive prices means that they are set to continue dominating in advanced manufacturing, even beyond EVs, batteries and solar panels.

For now, given the head start and the government initiatives to stimulate consumption, China is likely to be insulated from much of the tariffs’ impact. Therefore, long-term investments in China’s growing industries make good sense.

It helps that, despite solid past performance and future growth potential, many companies are still affordable. Muslim investors can refer to China-centred Islamic indices, such as the MSCI China A Onshore Islamic Index and the Dow Jones Islamic Market China A 100 Index, for ready shortlists of Shariah compliant stocks.

Disclaimer: Nothing you read on Tayyib Finance constitutes financial advice. Nor is there a guarantee of Shariah compliance of any particular stock at any particular time, since ‘Shariah compliance’ is fluid depending on the provider of judicial opinion and must be regularly affirmed. Do your own research.

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