Why Are Emerging Markets Investors Removing Their China Exposure? | Idea Farm

Why Are Emerging Markets Investors Removing Their China Exposure?

Marquette Associates

Julia Sheehan, Eddie Arrieta

Research

7 Pages

July 2025

Marquette Associates analyzes the rapid growth of EM ex-China strategies, noting how geopolitical tensions, regulatory risks, and China’s economic weakness have driven investors to diversify away. The report weighs both the benefits and trade-offs of excluding China, including greater sector concentration and higher volatility in EM allocations.

Key Takeaways

Strategy growth: EM ex-China funds rose from 7 strategies with $4.4B AUM in 2019 to 39 with $20.3B by March 2025.

Index shift: China’s MSCI EM weight fell to 32%, while EM ex-China indexes gained exposure to India, Taiwan, and Korea.

Performance trade-off: EM ex-China outperformed since 2021, but gains came with more volatility and sector concentration risk.

Markets International Markets

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