Recently, there’s been an intriguing phenomenon: global capital markets remain volatile, yet more and more smart money is quietly flowing into Chinese assets.
Why is this happening? Is it blind optimism, or is there a deeper investment logic at work? Today, let’s unpack the forces behind this capital shift.
01 Macros: How is China’s economy really doing?
Some media outlets fixate on short-term fluctuations and overlook China’s long-term growth potential. In 2024, China’s GDP growth still exceeded 4.5%, outpacing major developed economies. By comparison, the U.S. hovered around 2%, with the euro area even lower.
Behind that growth are ongoing urbanization and consumption upgrades. China’s urbanization rate surpassed 65% last year, and the consumption upgrade that accompanies city living is still underway. High-end consumption, healthcare, and smart-home segments continue to unleash new growth drivers. Meanwhile, the “Made in China 2025” strategy is accelerating, allowing leaders in semiconductors, new energy vehicles, and high-end equipment manufacturing to stand out and lift entire value chains.
Crucially, although the demographic dividend is fading, the “engineer dividend” and rapid technological innovation are stepping in to fill the gap—laying a solid foundation for long-term growth.
02 Three Key Advantages of Investing in China
Valuation advantage: Are Chinese assets really cheap?
One key reason capital loves to bottom-fish is simple: “cheap.”
From a valuation perspective, both A-shares and Hong Kong stocks are at historically low levels. Take the CSI 300 as an example: its current PE is around 11x, while the S&P 500 trades at about 21x—a stark difference.
It’s not just PE. On a PB basis, the CSI 300 is around 1.2x, and the Hang Seng Index is under 1x, whereas developed markets commonly exceed 3x. Lower valuations mean a thicker “margin of safety.” Once the tide turns, the upside for dip buyers can be substantial.
Index | Market/Region | PE (TTM) | PB |
CSI 300 (A-shares) | Mainland China | 11.0 | 1.2 |
Hang Seng Index (HK) | Hong Kong | 8.0 | 0.9 |
S\&P 500 (US) | United States | 21.0 | 4.3 |
MSCI Developed Markets | Global Developed | 18.0 | 3.2 |
Policy tailwinds: The policy backdrop is turning friendlier
Investors hate swimming against the current. The good news: policy winds are clearly warming.
The “dual circulation” strategy proposed in recent years is pushing consumption and industrial upgrading into a new phase. Semiconductors, new energy, and high-end manufacturing are seeing strong, explicit policy support and entering a breakout stage. In addition, the Belt and Road Initiative continues to drive infrastructure investment and RMB internationalization—benefiting export-oriented companies and infrastructure-related ETFs.
Domestically, state-backed funds (“the national team”) have been actively adding positions to stabilize the market. The expansion of the ETF Connect mechanism is also making it easier for international capital to access China. The signs suggest that smart money’s positioning in Chinese assets has both conviction and justification.
Standout growth potential within Chinese assets
The core logic isn’t only low valuations and warmer policy—it’s whether assets themselves have durable growth drivers. Right now, several high-prosperity segments in China with clear growth logic are drawing close attention from global capital:
New energy value chain In 2024, China sold 9.06 million new energy vehicles, up nearly 30% year over year, with market penetration topping 40% for the first time. New PV installs reached 160 GW, and new wind installs surpassed 70 GW—both No. 1 globally. Under the “dual-carbon” goals, new energy is set to keep expanding rapidly. Subsegments like lithium batteries, energy storage, and PV materials have long cycles and are expected to deliver >25% CAGR over the next five years.
High-end manufacturing & tech innovation In semiconductors, China’s chip self-sufficiency rate approached 30% in 2024, leaving ample room for import substitution. According to IC Insights, the global semiconductor market is set to grow at a 7.6% annual rate over the next five years, with China likely exceeding 12%. Meanwhile, industrial robot sales surpassed 300,000 units in 2024, up ~25% YoY, with China remaining the world’s largest market for industrial robots.
Consumption upgrade In 2024, China’s per-capita GDP exceeded USD 13,000, nearing the World Bank’s high-income threshold. At this stage, demand is accelerating in health-related consumption, premium baijiu, and medical aesthetics. For example, China’s medical aesthetics market reached RMB 330 billion in 2024 (+15% YoY), and the health supplements market surpassed RMB 600 billion (+10% YoY), underscoring both the clarity and sustainability of the consumption upgrade.
Against a backdrop of slowing global growth, these segments—supported by clear demand trends, value-chain advantages, and pro-growth policies—provide a solid foundation for China’s long-term growth and are a key reason global capital is adding exposure despite the macro headwinds.
03 What to Watch: Key Risks
Smart money doesn’t ignore risk.
Major risks in Chinese assets include policy and regulatory uncertainty—for example, evolving rules for new-economy companies and audit oversight. On the liquidity side, RMB exchange-rate fluctuations and the rhythm of cross-border capital flows can jolt markets in the short term. Geopolitics can also weigh on sentiment.
Timing entries precisely and deploying capital in tranches are therefore critical to success.
04 Positioning Ideas: When is a good time to get in?
Market bottoms are rarely clear. But given today’s low valuations and friendlier policy tone, now is a reasonable window to build positions in Chinese assets.
Consider the following directions:
Theme | ETF Name | Exchange | Ticker | Underlying Index |
Broad market | Southern A50 ETF | Hong Kong | FTSE China A50 Index | |
Broad market | iShares China Large-Cap ETF | U.S. | FTSE China 50 | |
High dividend / value | GX Hang Seng High Dividend ETF | Hong Kong | Hang Seng High Dividend Yield Index | |
Policy catalyst: Semiconductors | GX China Semiconductors | Hong Kong | China Semiconductors Index | |
Policy catalyst: Smart manufacturing | GX China Electric Vehicles | Hong Kong | China EV & Battery Index | |
China internet | CSOP Hang Seng Tech ETF | Hong Kong | Hang Seng TECH Index | |
China internet | KraneShares CSI China Internet | U.S. | CSI Overseas China Internet Index | |
Broad market | Huatai-PB CSI 300 ETF | A-shares (via Stock Connect) | $HUATAI-PINEBRIDGE CSI 300 INDEX TRADING SECURITIES INVESTMENT FUND(510300)$ | CSI 300 |
Broad market | China AMC SSE 50 ETF | A-shares (via Stock Connect) | SSE 50 | |
Broad market | Southern CSI 500 ETF | A-shares (via Stock Connect) | $CARD IN 500 EXCHANGE-TRADED INDEX SECURITIES INVESTMENT FUND(510500)$ | CSI 500 |
The essence of investing is buying growing assets at the right price. When valuations are low enough, growth runways are wide enough, and policy direction is clear enough, the logic behind smart money’s dip-buying deserves careful thought—and, for many, emulation.
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