Foreign Investors Bullish on China’s Hard Technology Assets
Major global investment institutions — including Goldman Sachs, BlackRock, and Manulife Investment — have collectively expressed strong bullish sentiment toward China’s “hard technology” assets, signaling a structural shift in foreign capital allocation toward Chinese semiconductors, artificial intelligence, and advanced manufacturing sectors, according to a report published Wednesday by Securities Daily and republished by People’s Daily.
Why Foreign Capital Is Flowing Back
The optimism marks a notable reversal from the 2022–2024 period, when geopolitical tensions, COVID-related disruptions, and regulatory crackdowns prompted significant foreign capital outflows from Chinese markets. Today, several factors are driving a renewed appetite for Chinese assets.
Valuation advantage stands out as a primary draw. BlackRock Fund’s Chief Investment Officer for Equities, Multi-Asset & Index, Wang Xiaojing, told Securities Daily that A-share large-cap stocks are at “reasonably low valuations” with a clear cost-performance advantage over U.S. stocks. In a low-interest-rate environment, their stable cash flow is particularly attractive.
“Overall, considering the safety of Chinese assets and the competitiveness of the full AI industry chain, the long-term investment value of A-shares is worth anticipating,” Wang said.
China’s “safety premium” is another key factor. Wang noted that China’s coal-dominated energy structure and diversified oil and gas import sources make it less vulnerable to international oil price shocks. Additionally, China’s stock and bond markets maintain strong independence from overseas inflation, and policy autonomy further strengthens this safety advantage amid escalating global market volatility.
The Numbers Tell the Story
The data backs up the bullish narrative. CSRC Vice Chairman Liu Haoling confirmed at the Shenzhen Stock Exchange’s 2026 Global Investors Conference in late May that foreign investors now hold over 4 trillion yuan in A-share circulating market value, making them significant participants in China’s capital market.
In the bond market, foreign institutions held 3.21 trillion yuan in interbank bonds as of May 2026, up 90 billion yuan from the end of April, according to data released by the People’s Bank of China Shanghai Headquarters on June 15.
Meanwhile, northbound capital flows recorded net buying of over 15 billion yuan across five consecutive trading days starting in early June, with more than 60% flowing to AI computing-related stocks, as reported by Economic Information Daily. QFII holdings also surged, reaching 221.2 billion yuan by Q1 2026 — a roughly 20% increase from Q4 2025.
AI Takes Center Stage
Artificial intelligence has emerged as the core investment theme driving foreign capital allocation. Goldman Sachs China Real Estate Team Head and Greater China Equity Research Co-Head Wang Yi noted that market funds are now highly concentrated in technology, favoring AI, robotics, advanced manufacturing, healthcare, and semiconductors.
Sun Shuo, Senior Fund Manager at Manulife Fund’s Equity Investment Department, said his team is focusing on the AI main line, favoring computing power, large models, and AI edge devices such as robots and smart glasses. “The intensity and iteration speed of this AI innovation cycle may exceed any in history,” Sun told Securities Daily.
However, both Wang Xiaojing and Sun Shuo cautioned against AI sector bubbles. Wang noted that while hardware companies like optical module manufacturers are consistently delivering earnings, pure large-model companies without actual performance support may be overvalued. Sun warned that if AI iteration speed exceeds society’s capacity to adapt, it could trigger unexpected market volatility.
The “Barbell Strategy”
Foreign institutions are not betting indiscriminately. Multiple firms — including HSBC, Morgan Stanley, and Goldman Sachs — have adopted a “barbell strategy” for A-share allocation: one end focused on high-growth technology stocks, the other on high-dividend defensive positions in utilities, financials, and state-owned enterprises. This approach balances growth exposure with downside protection amid global uncertainty.
What to Watch Next
The sustainability of foreign inflows will depend on several factors: whether U.S.-China tensions escalate further around semiconductor technology, whether Chinese hard-tech companies can deliver the earnings growth investors are pricing in, and whether China’s regulatory environment remains stable. The real estate sector also remains a wild card — while 10 major cities including Shanghai and Shenzhen have shown three consecutive months of price stabilization, the broader property sector continues to face pressure.
For now, the consensus among major foreign institutions is clear: China’s hard technology assets represent a compelling long-term opportunity, supported by valuation advantages, policy tailwinds, and the structural growth of the AI ecosystem. As Wang Xiaojing put it, the long-term investment value of A-shares is “worth anticipating.”