NEW YORK (Reuters) - U.S.-listed exchange-traded funds focused on China have drawn bullish options flows as the emergence of artificial intelligence startup DeepSeek brightens the outlook for Chinese tech shares, and tariff-related news seemed less threatening than before.

Traders have been loading up in recent weeks on bullish options on the KraneShares CSI China Internet ETF ( KWEB ) and the iShares Trust-China Large-Cap ETF, the two largest Chinese equity ETFs with combined assets of about $15 billion, options data showed.

One-month average daily trading volume in KraneShares CSI China Internet ETF ( KWEB ) call options, typically bought to position for upside, outnumbers defensive put options nearly 5-to-1, close to the most bullish this measure has been in about four years, Trade Alert data showed.

Options on large-cap focused FXI have also been in high demand with skew - a measure of relative demand for calls and puts - showing traders' preference for call options, recent Cboe data showed.

"There's been a lot of interest in China upside. That's definitely been a big theme," said Alex Kosoglyadov, managing director for equity derivatives at Nomura.

Chinese stocks have rallied in recent weeks as investors rush into AI-related stocks, betting that DeepSeek's advance will lead to a boom in the sector and give China the upper hand in an intensifying Sino-U.S. technology war.

FXI shares have risen about 12% and KWEB shares are up 14% since Chinese startup DeepSeek's late January rollout of its free AI assistant it said uses cheaper chips and less data, seemingly challenging the United States as an AI superpower.

"People are definitely growing optimistic about China's potential to produce an AI ecosystem that's competitive with what the U.S. has been building out," Kosoglyadov said, noting bullish flows into the FXI and KWEB ETFs.

Some of the options optimism may also have to do with tariff-related relief.

U.S. President Donald Trump had promised 60% tariffs on Chinese imports before he was elected, but revised that to 10% after taking office.

Global hedge funds keen to navigate U.S.-China trade tensions are amassing Chinese stock bets in the hopes of making huge profits if Beijing forms a pact with Trump, or if the rest of the world and China unite against him.

"I think people are ultimately optimistic because you've had a much softer tone on China from the Trump administration, if you compare what we heard during the campaign," Kosoglyadov said.