Although the US and China haven’t yet finalized a trade deal, Chinese equities are trading near 10-year highs, lifted by continued enthusiasm about China’s 2024 stimulus measures and its DeepSeek artificial intelligence models.
Also lifting stocks are measures to address deflationary competition as well as retail investors tiptoeing back into the market.
So far this year, iShares MSCI China ETF MCHI is up 32.8%, compared with 14.6% for the iShares MSCI All-Country World Index ETF ACWI and 10.7% for SPDR S&P 500 ETF SPY.
Yet there’s plenty to worry about. China and the US have wrangled over a tariff deal for months, with the most recent truce set to expire in mid-November.
In a July report, Morningstar analysts led by Kai Wang wrote, “We think investors should stay wary of forthcoming trade deals as Donald Trump’s administration appears to indirectly target China, risking tensions again.”
China’s economy also remains weak. July retail sales grew slowly, while factory output and fixed-asset investment slumped. “The government’s 5% GDP growth target for this year is looking like a reach,” Yardeni Research writes. “While China stock bulls should be wary of the tariff risks on the horizon, the bigger, more immediate problem may be the worsening economic troubles with the potential to undermine companies’ earnings growth prospects and render current elevated valuations unsustainable.”
That makes being selective more important. Raymond Ma, Invesco’s chief investment officer for mainland China and Hong Kong, wrote in a June note to investors: “Amid the macro uncertainty, we believe navigating China equities requires a disciplined and selective approach. Rather than relying on broad sectoral themes, we believe investors may adopt a bottom-up strategy, focusing on individual companies with strong fundamentals, resilient earnings, and limited exposure to external shocks such as tariffs.”
What Are the Best Chinese Stocks?
To come up with our list of the best Chinese stocks to buy now, we screened for:
- Chinese companies whose stocks trade on a US exchange.
- Chinese companies that earn wide Morningstar Economic Moat Ratings. We think companies with wide economic moats should remain competitive for 20 years or more.
- China stocks that are undervalued, as measured by our price/fair value metric.
5 Top China Stocks
These wide-moat Chinese companies are the most undervalued according to our data as of Aug. 27, 2025.
Below, we give an overview of these top Chinese stocks, with insight from Morningstar analysts. All data is as of Aug. 27, 2025.
JD.com JD
Analyst: Chelsey Tam
- Price/Fair Value: 0.53
- Morningstar Uncertainty Rating: High
- Capital Allocation Rating: Exemplary
- Industry: Internet Retail
“We think JD.com has a wide moat based on an intangible asset of high reliability and assurance (on-hand inventory, quality, fast proprietary logistics services), and cost advantage resulting from its growing economies of scale in its first-party business. We believe JD Logistics, or JDL, the consolidated logistics unit of JD.com, and JD.com create synergies and a moat cannot be assessed by segment.”
Yum China YUMC
Analyst: Ivan Su
- Price/Fair Value: 0.61
- Morningstar Uncertainty Rating: Medium
- Capital Allocation Rating: Standard
- Industry: Restaurants
“Yum China boasts a strong, almost debt-free capital structure. At the end of 2024, Yum China had USD 2.9 billion in cash and short-term investments against just USD 127 million in debts. We expect the company to remain in strong financial standing over the foreseeable future.”
Baidu BIDU
Analyst: Kai Wang, CFA
- Price/Fair Value: 0.63
- Morningstar Uncertainty Rating: High
- Capital Allocation Rating: Standard
- Industry: Internet Content & Information
“Baidu’s wide economic moat is created by its network effect from a dominant share of the user base and intangible assets from years of AI development and research and development. As one of the earliest internet companies in China, Baidu has built an ecosystem around search and successfully shifted to mobile internet by releasing various well-received mobile apps, such as its flagship Baidu app, which had 580 million monthly active users as of second-quarter 2021, and Baidu Maps. According to web analytics firm Statcounter, Baidu’s market share as of September 2021 was 82.5%, compared with its closest Chinese competitor Sogou at 7.6%.”
Tencent Holdings TCEHY
Analyst: Ivan Su
- Price/Fair Value: 0.77
- Morningstar Uncertainty Rating: High
- Capital Allocation Rating: Exemplary
- Industry: Internet Content & Information
“Over the past decade, Tencent has capitalized on the mobile gaming boom, owning hugely popular titles such as Honor of Kings and PUBG Mobile. Games remain its primary monetization engine, generating an estimated 60% of operating income. Leveraging unparalleled user data access and substantial financial resources, Tencent is well-positioned to continue developing innovative, high-quality, and enduring franchises.”
Alibaba Group BABA
Analyst: Chelsey Tam
- Price/Fair Value: 0.80
- Morningstar Uncertainty Rating: High
- Capital Allocation Rating: Standard
- Industry: Internet Retail
“Despite increasing competition, we’re maintaining our wide economic moat rating based on Alibaba’s strong network effect, where the value of the platform to consumers increases with a greater number of sellers and vice versa. Alibaba is monetizing its network effect better than any other e-commerce platform in China. The short video platforms Douyin and Kuaishou have not proved they can monetize the physical goods e-commerce market with a durable profit margin, but Alibaba has been profitable for a decade, and we believe it will remain profitable for the next 20 years.”
