China: Back in the Game
The stock market is all about confidence. Company earnings matter, but just as important is whether governments create the right conditions for businesses to thrive. In the US, Trump’s back-and-forth on tariffs is making investors nervous and raising questions about long-term corporate growth. Meanwhile, in China, Xi Jinping’s highly publicized meeting with top tech entrepreneurs last month has sent a strong signal of support to the private sector. After years of crackdowns, this was a major confidence boost. Combine that with DeepSeek’s recent AI breakthrough, it’s easy to see why some big banks have shifted their stance. Citigroup, for example, has downgraded US stocks while upgrading China, a shift that seemed unlikely just months ago.
Goldman Sachs has also pointed out that US market volatility is making Chinese stocks look more attractive. But what really makes me believe this rally has legs is that it’s not being driven by foreign money, rather it’s local investors leading the charge. That’s important because it means the rally isn’t just a knee-jerk reaction to shifting global sentiment. It’s a sign that Chinese investors are regaining confidence in their own economy. Earlier this month, mainland investors poured a record amount of HK$29.6 billion (about US$3.8 billion) into Hong Kong stocks in a single day, according to Bloomberg.
I think this rally still has more room to run. China’s economy is stabilizing, the government is putting more emphasis on growth, and there’s a clear shift toward more business-friendly policies. On top of that, Chinese equities are still trading at a discount to US and European markets, making them even more appealing.
Having said that, I doubt if this would mean we’ll see a fundamental shift from US to Chinese tech stocks. There are too many geopolitical and policy hurdles in place. But we are seeing more investors take notice of China’s AI and semiconductor developments, and the country is no longer playing catch-up, it’s competing at a global level.
One question I often get is whether China should still be considered an emerging market. That’s really up to index providers to decide, but at this point, the label feels less and less relevant. When you look at China’s breakthroughs in AI, its dominance in electric vehicles, and its rapid progress in financial technology, it’s clear that in many sectors, it’s already operating at a developed-market level. Investors are starting to recognize that, and as global capital rotates, China’s weighting in portfolios is likely to rise.
Of course, risks remain. Geopolitical tensions, regulatory uncertainty, and the lingering challenges in China’s property sector aren’t disappearing overnight. But markets don’t move in straight lines, and often the best opportunities emerge when people are still skeptical. Right now, I see a policy environment that’s improving, a domestic investor base that’s stepping up, and a growing willingness from global funds to increase exposure.
That’s why I’m looking to add more exposure to China and Hong Kong. And I’m excited to see how things play out, especially as more global investors start to take notice.
