Chinese stocks have posted strong returns this year. After a number of false dawns following earlier stimulus packages from policymakers, investors again face the question of whether this time is different for Chinese equities.
Arguably, there is appetite among investors for diversification away from US equities. At the same time, Beijing is trying to spur the economy. It remains to be seen, however, whether its policies will offset existing structural impediments and the impact of US import tariffs.
In January, a previously little-known Chinese start-up called DeepSeek presented an artificial intelligence (AI) large language model (LLM) showing a performance comparable to those of the leading US models. The unexpected development disrupted the paradigm of a quasi-monopolistic position for prominent US chip manufacturers.
Chinese tech stocks have now gained thanks to their previously low valuations and a newly improved earnings outlook. We expect the benefits of China’s AI to spread quickly across the domestic economy, offering further opportunities for investors.
