Gokul Laroia, Morgan Stanley's Asia CEO and Global Co-Head of Equities, attended the 2026 Lujiazui Forum in Shanghai last week, participating in a plenary session focused on building a well-functioning capital market. He noted that global investor interest in the Chinese market is growing significantly, driven in part by themes like artificial intelligence.
Global Capital Pursues AI, China Holds Unique Position
Laroia highlighted the surge in global AI investment, now estimated at approximately $1 to $1.5 trillion annually. He pointed out that the supply chains underpinning this investment are rooted in Asia, with China playing a pivotal role.
"Beyond the United States, China is the only market with an independent and comprehensive AI ecosystem, and it is continuously evolving," Laroia stated. He added that hundreds of Chinese companies are involved in innovating and building this ecosystem, each with the potential to create substantial value. Morgan Stanley assesses that the entire ecosystem has the potential to generate an incremental market capitalization of $3 to $4 trillion. However, achieving this requires these companies to have effective access to capital.
Capital Allocation Meets Chinese Asset Opportunities
Laroia also emphasized that the current geopolitical landscape has made energy transition and defense investment areas as crucial as AI. The opportunities within the Chinese market align well with these investment needs. Citing Morgan Stanley macro research analysts, he noted that annual spending in Asia across these three key investment areas is projected to grow from about $11 trillion currently to $16 trillion by 2030. This growth will significantly benefit companies providing the industrial infrastructure for these sectors, many of which are headquartered in China.
He remarked, "The amount of capital that has already flowed in is only a small fraction of what should and needs to flow in."
Pathways for China to Attract Global Capital
Laroia proposed three key recommendations for how China can better facilitate the inflow of global capital.
First, continue advancing the institutionalization of the market. Greater institutional participation enhances the stability, reliability, and consistency of capital supply. He also advocated for collaboration with global index providers to increase China's weighting in global indices. Given that China's market is now larger, deeper, and more liquid, the free-float market cap caps applied to Chinese markets in these indices should be adjusted accordingly.
Second, provide global investors with a broader range of product offerings for the Chinese market. He stressed that while many investors want to allocate more capital to China, this is difficult without appropriate hedging tools to meet diverse investment needs.
Third, reduce barriers to market participation. This includes maintaining regulatory transparency, consistency, and the importance of public consultation processes.
Laroia concluded that implementing these three recommendations, alongside measures supporting innovative companies—especially those in pre-commercialization stages, such as providing listing opportunities and fostering institutional investor participation—would substantially increase the scale, quality, and stability of capital invested in the Chinese market.
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