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Learning Chinese as an investor is as simple as remembering the letters FXI.

That's the symbol on the New York Stock Exchange for the iShares FTSE/Xinhua China 25 exchange-traded fund (ETF) FXI-N, which tracks the largest, most liquid Chinese companies that foreigners can invest in. There are more than a dozen exchange-traded funds, closed-end funds and mutual funds that investors can use for exposure to the Chinese market, but FXI is far and away the most popular choice if you judge by typical daily trading volumes.

In fact, FXI is one of the most widely traded of all ETFs. On a typical day, it might trade anywhere from 15 to 40 million shares, which often puts it among the two dozen most active names among the 785 or so ETFs listed in the U.S. market. Among single-country ETFs, only the ones tracking Japan and Brazil have generated more interest lately from investors.

The stocks in the FTSE/Xinhua China 25 index include China Mobile, the largest holding at 9.5 per cent, Bank of China and PetroChina. Financials represent about half the index, followed by telecom at 17 per cent and oil and gas at 12 per cent. Management fees come in a 0.74 per cent, high for ETFs as a general rule but typical of what investors must pay for exposure to single-country markets or specialized sectors.

FXI has been criticized as being too heavily invested in state-owned businesses, which may be run in such a way as to further national interests as opposed to maximizing returns for shareholders. On the other hand, the stocks in the FTSE/Xinhua China 25 are well established, non-speculative names, and they can be considered prime beneficiaries of the economic stimulus the Chinese government has undertaken to fight the global recession.

Performance-wise, FXI has not been a leader so far in 2009. That distinction goes to the newish Claymore/AlphaShares China Small Cap Index ETF HAO-N, which jumped 67 per cent for the year through late September. Two other China ETFs, Power Shares Golden Dragon Halter USX China Portfolio PGJ-N and the SPDR China ETF GXC-N were up 55 and 48 per cent, respectively. FXI, meanwhile, rose 42 per cent.

Where FXI stands out is in its longer-term results. Many China funds have been around for only a few years, so a three-year horizon is about as long as you can go and still get a meaningful comparison. FXI's cumulative three-year return is 53 per cent, better than virtually all competitors. This includes a number of closed-end funds, which are essentially actively-managed mutual funds that trade like a stock. They're different from ETFs, which track indexes and thus do not use the services of a manager who picks stocks.

The Templeton Dragon Fund is one of the most popular closed-end funds focusing on China, if you judge by trading volumes. This fund has gained 45 per cent this year and about 15 per cent for the past three years, cumulatively speaking. Note: this fund invests at least 45 per cent of its assets in companies that are based or active in China and can buy into other Asian firms. Other closed-end choices for China with a solid track record include the JF China Region Fund JFC-N, the China Fund CHN-N and the Greater China Fund GCH-N.

One thing to remember with closed-end funds is that they can trade at either a discount or a premium to their net asset value (a good resource for tracking this information is the Closed-End Fund Association's website at cefa.com). Ideally, you'd buy at a discount and wait for the full net asset value to be reflected in the share price, or even for a premium to develop. For the most part, China closed-end funds are trading at slight discounts today.

As an exchange-traded fund, FXI is much less vulnerable to a situation where its share price falls below its net asset value. This, along with its market-leading liquidity and its focus on well-established companies, makes it well worth a look for investors seeking exposure to China.