China assets gain global appeal

AS geopolitical tensions, diverging economic policies and rapid advances in artificial intelligence (AI) reshape global markets, senior economists say that Chinese assets are emerging as a key anchor, with the country’s cost-effective AI ecosystem well positioned to support a new round of manufacturing upgrading.

With China pushing ahead with financial opening-up, economists say the case for including Chinese assets in global portfolios is likely to strengthen further, even as US equities continue to play an important role in global asset allocation.

Despite persistent uncertainty, global cross-border capital continued to expand in 2025, with the United States, the United Kingdom and China remaining among the world’s major destinations for international capital, says Zhang Xiaoyan, associate dean at Tsinghua University’s People’s Bank of China School of Finance.

“The core logic of global capital allocation is simple: Investors seek better returns with lower risks,” Zhang says. “Chinese assets could offer both.”

On the return side, Zhang points to strong growth potential in China’s emerging sectors such as digital technology and software, advanced manufacturing, automation, clean energy and green technology.

In terms of risks, Chinese assets have low correlation with European and US markets, making them “effective diversifiers”, she adds.

In particular, the AI revolution is a key driver of the shifting global investment landscape.

Despite mounting risks from geopolitics, tariffs, energy shocks and inflation, new opportunities are emerging in AI infrastructure, energy transition and supply chain restructuring, says Shane Zhang, chairman of Morgan Stanley Securities (China).

Zhang says that Asia, and China especially, may be entering what he described as an investment- and manufacturing-led “super cycle”.

“China’s supply chain resilience, high-end manufacturing, materials and AI industrial chain are drawing growing international attention,” he adds.

Dismissing AI bubble fears, he highlights China’s cost advantage, noting that achieving comparable model inference performance – the point at which a trained AI model processes new data in real time and produces output – in the country costs just 15% to 20% of the figure for the United States.

“That will drive broader AI adoption across China’s economy,” he adds.

Miao Yanliang, chief strategist at China International Capital Corp, also says the AI revolution is no speculative bubble so far.

“The technology is indeed boosting productivity, there’s no heavy use of leverage, and valuations are not excessive by historical standards.”

Miao says the adoption of AI is approaching an inflection point where gradual growth turns to exponential acceleration.

“The winner won’t be just one; it could be both China and the United States, and the rest of the world could also benefit from this technological revolution,” he adds.

In the new landscape, investors can no longer rely on a single anchor. The United States remains a vital component, but ignoring China is no longer an option, according to economists.

“Global capital is moving from an overweight position in US assets towards more diversified allocation,” Miao says, noting that China’s current weighting in global portfolios remains below the country’s economic strength and corporate performance.

As central banks diversify reserves and investors seek alternatives to dollar-centric holdings, yuan-denominated assets are gaining attention, Miao says, adding that China’s continued financial opening and the steady internationalisation of its currency support this shift.

China’s financial opening is gathering pace, with easier market access for qualified foreign institutional investors and improved cross-border investment mechanisms, which is expected to give Chinese assets more weight in global portfolios, experts say.

“Investors need to adapt their strategies to changing market environments,” says Zhang Xiaoyan, the Tsinghua University’s associate dean.

“With China’s high-level opening-up and the implementation of favourable policies, the domestic capital market will welcome more development opportunities, offering long-term investment potential for investors at home and abroad.”

Despite the growing appeal of Chinese assets for global investors, economists say the pace and momentum of domestic demand recovery remain a key factor for investors to watch.

Chinese enterprises’ innovation and production capabilities are highly competitive, says S&P Global Ratings’ Asia-Pacific chief economist Louis Kuijs, noting that the challenge lies in domestic demand and consumption.

In Kuijs’ view, stimulating consumption hinges on addressing households’ worries about income and job stability, and increasing the availability of public services, such as healthcare and education for the country’s urban migrant population.

In a separate report, China is doubling down on high-standard opening-up, offering multinational corporations something that has become increasingly scarce: market stability, policy predictability and a vast consumer base, officials and experts say.

“The global economy is undergoing profound adjustments, and the uncertainty around the recovery is rising,” Vice-Minister of Commerce Yan Dong says.

“At the same time, a new wave of technological and industrial transformation is accelerating.

“New growth drivers, such as the digital economy, green and low-carbon development, and advanced manufacturing are booming.

“The willingness of global companies to seek stable markets, a quality business environment and long-term cooperation has never been stronger,” Yan adds.

In the first four months of 2026, high-tech foreign direct investment surged 20.3% year-on-year to 116.3 billion yuan (US$17.1bil), and the number of newly established foreign-funded enterprises rose 6.8% over last year to more than 20,000, data from the ministry show. — China Daily/ANN