ChiNext Index Hits Near 11-Year High Amid Market Surge

Despite turbulent global conditions, leading companies in the Chinese stock market have recently reached new historical highs. These include emerging enterprises in artificial intelligence and new energy, as well as traditional firms in basic chemicals and machinery.

Driven by prominent companies like CATL and Zhongji Xuchuang, the A-share market is advancing confidently, with the ChiNext Index hitting a near 11-year peak. These standout firms shine like bright pearls, easily capturing attention, such as the newly emerged Zhangxue Motorcycle and the globally leading CATL. However, behind their success lie systemic factors including China's industrial clusters, consumer market, and engineering talent, which underpin the resilience of the Chinese economy and its stock market.

In times of instability, the appeal of stable assets becomes more pronounced. The recent surge of the renminbi against the US dollar past 6.8 marks a three-year high. Global capital is actively seeking "HALO" assets—those characterized by heavy assets and low disruption—and the A-share market is rich with such opportunities due to advantages in scale, talent, and market dividends inherent to a major economy.

In the short term, stocks act as voting machines, but in the long run, they serve as weighing scales. With A-share valuations and dividend yields at reasonable levels, investors should not relinquish their holdings due to external volatility. Holding onto high-return companies, akin to Warren Buffett's strategy, remains the key to long-term investment gains.

The status of the "World's Factory" remains unshaken. In traditional industries, China's position is difficult to challenge, not because other nations cannot produce similar goods, but because they cannot match the cost efficiency. Economists note that China's supply chain exhibits extreme cost-control capabilities, creating a gravitational pull akin to a "black hole" that solidifies its role as the global manufacturing hub.

On March 28, Chinese motorcycle manufacturer Zhangxue Motorcycle achieved a double victory in the World Superbike Championship, ending decades of dominance by international brands like Ducati and Yamaha in the SSP category. More striking is the price comparison: the civilian version of its race bike, the 820RR, is priced at just 43,800 yuan nationally, whereas imported motorcycles with similar horsepower typically exceed 120,000 yuan.

The rise of Zhangxue Motorcycle is underpinned by China's industrial clusters. This robust cost-control capability is supported by an integrated supply chain system. Supply chain advantage means that if a product requires 1,000 components, approximately 900 can be sourced locally without the need for custom molds, leveraging existing suppliers. Clusters of interrelated industries in the same region evolve together, fostering exceptional cost control and rapid product iteration—the secret to the strength of Chinese manufacturing.

Taking Zhangxue Motorcycle as an example, Chongqing became its manufacturing base not due to subsidies. The founder noted that when he arrived in Chongqing in 2013, he could source all parts for a motorcycle in a single market. The city hosts over 40 vehicle manufacturers and more than 400 component suppliers, with a local sourcing rate exceeding 90%.

Once formed, such geographic industrial clusters become highly competitive globally, as upstream and downstream sectors co-evolve and reinforce each other. Michael Porter, in "The Competitive Advantage of Nations," emphasized that clusters enhance a nation's competitiveness in end products, production equipment, upstream supplies, and after-sales services.

Similarly, consider the steel tape measure: Yucheng County's Shaogang Town in Henan Province produces over 85% of China's and more than half of the world's supply. As noted in a survey, although the technology is not highly complex, producing a 5-meter tape measure for 2 yuan cannot be explained by low technical requirements alone.

Emerging sectors like drones, robotics, new energy, and innovative pharmaceuticals in China demonstrate strong global competitiveness, backed by vast markets, resources, and engineering talent.

In the race for leadership in industrial revolution trends, a clear pattern is emerging: the number of contenders is shrinking. In emerging industries reliant on scale and resources, such as AI, next-generation communications, and new energy, mid-sized economies like those in Western Europe, Japan, and South Korea are struggling to keep pace, often relegated to secondary roles.

For instance, a single AI model like ChatGPT consumes over 500,000 kilowatt-hours daily—equivalent to the energy use of 17,000 US households—and this is just the beginning. Widespread AI adoption could lead to energy demands far beyond current estimates.

Traditional industries like power, basic chemicals, and machinery form the infrastructure for emerging sectors. China's annual electricity consumption is projected to exceed 10 trillion kilowatt-hours by 2025, maintaining its position as the world's largest. Globally, China's yearly consumption is more than double that of the US and surpasses the combined total of the EU, Russia, India, and Japan in 2024. Historically, this figure is nearly twice the consumption in 2015.

The strength of the supply chain also determines the height of emerging industries. Complex electronic products often require hundreds or even thousands of supporting factories, forming an extensive and intricate supply network. According to "China and Global Industrial Chains," China holds an absolute advantage in over 80% of high-centrality product exports, reflecting a resilient supply chain. From 2017 to 2018, among 3,556 intermediate goods traded globally, China ranked in the top three exporters for 2,247 items. Of 858 high-centrality products, China was a top-three exporter for 693, leading in 444 categories both years.

A book documenting China's photovoltaic industry, "Solar Power of a Major Nation," highlights that each country's solar sector has distinct genes: the US often politicizes new energy, Germany's policies relate to anti-nuclear movements, and Japan focuses on energy self-sufficiency with little regard for international markets. China's new energy sector differs significantly. First, it possesses a strong manufacturing DNA, prioritizing low-cost production and quality over debate. Second, it has always targeted the global market, persisting despite anti-dumping measures from Europe and the US.