The launch of DeepSeek has unsettled the world’s belief that it “could contain China”, said Deutsche Bank, calling the emergence of the artificial-intelligence (AI) technology the country’s “Sputnik moment”.
By characterising the start-up’s achievement as a significant turning point for the country, the bank goes further than Marc Andreessen, the influential Silicon Valley venture capitalist, who referred to DeepSeek as a Sputnik moment for the AI sector. The comments refer to Soviet Union’s launch of the world’s first artificial satellite in 1957, which instantly changed perceptions of that country.
“We think 2025 is the year the investing world realises China is outcompeting the rest of the world,” Deutsche Bank said on Wednesday in a report titled “China Eats the World”, seen by the Post.
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The bank was already bullish on Chinese companies, but had been uncertain about what would trigger a global rush into them until now, it said. “We believe the bull market for [Hong Kong and China] equities began in 2024, and will exceed prior highs in the medium term,” said the report, authored by Peter Milliken, Hong Kong-based head of Asia-Pacific company research with the bank.
China’s dominance in high-value industries was expanding at an unprecedented pace, according to the bank. With world-leading companies gaining market share across industries, China was unlikely to remain a single-digit percentage of global market capitalisation for long.
DeepSeek’s overnight fame has led to a rally in Chinese technology stocks, while triggering a sell-off in Nasdaq-listed firms. The Hang Seng Tech Index, led by major companies such as Tencent Holdings, Alibaba Group Holding, and Xiaomi, approached a four-month high on Thursday after surging more than 10 per cent in the past two weeks. The broader Hang Seng Index also rose about 6 per cent. Shares of DeepSeek, founded in the Zhejiang provincial capital of Hangzhou by Liang Wenfeng in 2023, are not publicly traded.
Deutsche Bank’s report dismissed some of the concerns about Chinese stocks – from US- China relations to a prolonged property downturn – by arguing that they could have positive outcomes, even in terms of tariffs, which the bank estimated could end up being 20 per cent.
US President Donald Trump behaved more like a trader than an investor, the report said. “If so, expect him to run a fairly tight stop-loss limit,” the bank added, suggesting that Trump would adjust the policy if tariffs become unfavourable.
Concern over China’s declining population missed the big picture, the report said. China’s lead in automation gave the country a productivity advantage, it said. With programmes like the Belt and Road Initiative, China was expanding its economic reach to sell more to a larger population.
There are as many consumers in Africa, Central and South Asia, Asean, and Latin America as in China, and “if things get more friendly, as many people to sell to in India”, it said.
Addressing a common comparison, the bank said that China resembled Japan in the early 1980s, with rapid innovation and cost-effective, high-quality products, rather than Japan in 1989, when its economy peaked before stagnating.
“Like Japan, China has had an extreme property bubble, but not nearly as extreme,” Deutsche Bank said.
China’s home sales fell by 17.6 per cent in 2024 and are expected to drop 9 per cent in 2025, extending a deep correction to 56 per cent since the all-time high in 2021, according to a report published by Goldman Sachs this week.
More from South China Morning Post:
- DeepSeek halts account top-ups as AI models rival ChatGPT’s popularity
- DeepSeek vs Trump tariffs: how will China’s markets react in the Year of the Snake?
- DeepSeek fuels Chinese tech stock rally as valuation gap narrows vs ‘Magnificent Seven’
- China’s ability to launch DeepSeek’s popular chatbot draws US government panel’s scrutiny
- Reacting to DeepSeek, US Senate bill would separate US and China efforts to develop AI
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