How to invest in China Tech

Please find below our latest thoughts on China:

• During a European client roadshow earlier this month, one of the frequently asked questions was: “Why has China technology performed so badly?”
• This reflects that, for many Western investors, the China tech story remains anchored in the big internet and ecommerce platforms.
• As these stocks are dominant constituents of the MSCI China Index, which is embedded within the MSCI Emerging Markets (EM) Index, this is where many investors have much of their China exposure.
• The reality is that China tech in the broader sense has performed well – at least those stocks more directly linked to AI.

• One way to show this is the performance of the ChiNext Index, often referred to as China’s Nasdaq.
• ChiNext was established in 2009 to support more innovative and high-growth companies, particularly in technology and other emerging industries. Many of these firms would not meet the stricter listing requirements of the Shanghai and Shenzhen main boards, especially around profitability and scale.
• The ChiNext Index recently broke through to new all-time highs, spurred by tech and AI-related names.¹
• Indeed, since the low point of China equity markets in February 2024, ChiNext has returned around 145%, versus 55% for the MSCI China Index (USD).²
• So what are these tech stocks that have been doing so well? Because China does not have a “TSMC” or a “Samsung Electronics”, these companies do not often hit the headlines.
• Nonetheless, they are playing a key role in the build-out of China-centric AI infrastructure including chips, data centres, models and applications. Indeed, in a number of cases they are also key suppliers to US hyperscalers.
• To give some practical examples, they include companies specialising in:

- Optical transceivers – these convert data into light, enabling ultra-fast transmission over fibre-optic cables.

- Printed circuit boards – these are very thin, flat boards that connect electronic components such as processors, memory and storage. They are especially critical for AI hardware as they enable very high-speed data flow and support heavy computing loads reliably.

- AI semiconductors/chips – the “brains’’ powering AI systems, these companies design or manufacture the chips that run AI models, often referred to as training and/or inference. 

• So, if these stocks are performing so well, what explains the lacklustre performance of the big and more familiar tech names that dominate the MSCI China Index?
• In our view, there are a number of factors. Overall, these internet/ecommerce businesses have come to be seen as “traditional” or more mature tech. Their growth rates are more moderate, weighed down by weak domestic consumption. And they are investing heavily in AI-related capex (although not as heavily as in the US), which reduces the free cash flow previously allocated for share buybacks.
• As such, we see them being used either as a source of funds for more direct AI plays within China, or to fund participation in new tech IPOs in Hong Kong or invest in other regional markets such as Taiwan and Korea.
• Our overall view on technology is that capturing China AI opportunities requires a broader investment universe, including exposure to China A-shares.
• A final word on President Trump’s visit to Beijing. From an overall market perspective, although short on details, the summit was at least “warm” in tone with an apparent effort to establish a diplomatic roadmap.
• Clearly, the diplomats had given a lot of thought to how to navigate sensitive areas and build personal rapport.
• US Secretary of State Marco Rubio had previously been banned from visiting China – in a neat, face-saving manoeuvre he was given a very slightly different Chinese spelling of “Rubio”. And the official state banquet closed with a rendition of YMCA – such is the way of the world these days. 

1 Source: Bloomberg as at 18 May 2026 
2 Source: Bloomberg as at 18 May 2026