At the risk of serving up a bowl of alphabet soup, a word or two of explanation and a few abbreviations are probably in order here.

BGI is the world's largest provider of exchange-traded funds (ETFs). These are open-end, index-tracker funds that are bought and sold like ordinary shares on a stock exchange and trade at prices very close to their net asset value (NAV) per share. That can make them relatively better value than managed funds, which often trade at a discount to their NAV. They are used as a tool by investors to gain diversified exposure to a market.

For retail investors, ETFs are a flexible, cheaper alternative to mutual funds and for institutional investors, they offer a chance to balance their traditional portfolios with relatively stable exposure to unusual indices.

The iShares FTSE/Xinhua China 25, which uses the code 'FXC', tracks leading red chips and H shares listed in Hong Kong.

The 25 constituent stocks - spread between must-have telecommunications plays such as China Mobile and China Telecom, and a range of segments from petrochemicals, such as PetroChina and China Petroleum & Chemical to shipping, infrastructure and finance - are bundled into a single tradeable share. They offer British investors a relatively uncomplicated vehicle for exposure to China.

FXC, which is aimed at both institutions and retail investors, trades in London, offering an escape from the complications and confusions of the China market. Hong Kong, as its marketing teams never tire of reminding the world, has the infrastructure and the regulatory framework to make it an attractive service centre and jumping off point for China. And that applies as much to trading on the stock exchange as to any other investment.

According to Bruce Lavine, head of BGI subsidiary iShares Europe, investors have been clamouring for just such a share for about a year. Now they've got it, they love it.

BGI is the only company offering a pure China ETF in the United States or Europe.

In the US, where BGI already operates ETFs for Korea, Taiwan and one or two other emerging markets or regional funds, its new iShares ETF for China has proved astonishingly popular.

Since it opened in New York on October 8, the US fund, which started out with roughly US$20 million of assets, has grown with the issuance of new shares to a remarkable $80 million.

For the moment, the London fund still has some way to go. By day four, last Thursday, the initial offering of 350,000 shares was only about 15 per cent placed, at a price and NAV per share of about #27.40, but was trading strongly, at about 20,000 shares a day, and Mr Lavine said it was expected to do well.

Investors seem to relish the opportunity of putting a percentage of their portfolio in the world's largest emerging economy. Once the existing shares are sold, iShares will be able to issue new ones.

BGI sees China as the next big destination for investors' hot money. London is just the starting point for the new fund. Eventually, iShares hopes to list its European China ETF in Germany, the Netherlands, France and other major eurozone markets, where clients are looking to make bigger gains than are available through investment in their relatively sluggish domestic economies.

All of this looks very positive. If investors are so keen to put money into China at such a time of uncertainty (even if this week's surprise interest rate rise has raised hopes of a soft landing), then perhaps there is less reason to listen to the prophets of doom.

Maybe so. But let's not get carried away. The very fact that an ETF is a single stock that can be traded on the market like a normal company chip makes it a very useful tool for hedging those long-term economic bets.

Sure, if you think the market can only go up, you can buy long. But, equally, if you think the Chinese economy is about to implode, you can always sell short. Watch out for hedge funds making a fortune either way.