Chinese Tech: Structural Support and Technological Upside

While the IMF revised 2025 global growth slightly upwards to 3.0%, China’s outlook improved significantly to 4.8%, highlighting relative resilience amid US and Europe remaining nearly unchanged. While most economies are still grappling with stubborn inflation, China is targeting reflation - a tailwind that supports both economic growth and financial assets.

The PBoC has injected significant liquidity into money markets in recent months, stabilizing credit conditions and pushing investors back into equities. Alongside these monetary measures, fiscal policies in housing, education, and employment are targeting domestic demand. At the geopolitical level, recent tariff rollbacks with the US show tactical de-escalation, while China’s control of 90% of refined rare earths keeps it strategically indispensable.

Despite US restrictions on Chinese tech companies, innovation continues to go forward. Alibaba is committing $53 bn to AI and cloud, Tencent is scaling AI platforms, and domestic hardware champions are advancing - Xiaomi’s new high-performance chips and CXMT’s rising global market share in memory underscore resilience. Applied AI is scaling too, with Baidu’s robotaxis completing 14m rides and Unitree being the first company to commercialize a humanoid robot with an affordable price of $16k. 

E-commerce also remains a significant growth engine. Retail web sales reached $2.2 trillion in 2024, compared with $1.2 trillion in the US, with online purchases accounting for 35% of total retail sales (vs 17% in the US). Internet users stood at 1.11 billion, a penetration rate of 78%, still leaving headroom relative to the US at 93%. Despite economic headwinds in recent years, the biggest Chinese internet companies delivered revenue growth similar to their US counterparts over the past few years.

From a valuations perspective, leading Chinese tech firms trade at 17× forward earnings versus 31× for their US peers. Even against other emerging markets, valuations remain compelling as Chinese equities overall trade at nearly a 50% discount to India and about 25% to Taiwan, despite strong cash balances and increasing buyback activity.