China's Politburo holds back on stimulus, but we stay positive on China tech

• The Politburo preserved room for further support but did not signal a new large-scale stimulus cycle.

• July manufacturing PMI fell to 49.2, highlighting a stark two-track divergence: high-tech manufacturing stayed in expansion at 53.3, while consumer-facing and energy-intensive sectors weakened further.

• Policy tailwinds reinforce our positive stance on China tech: the GF CSI All-Share Information Technology ETF (SZSE: 159939) provides targeted exposure to the areas most closely aligned with policy priorities, while offering strong earnings visibility and lower dependence on domestic consumption and property.

• iShares Hang Seng TECH ETF (HKEX:3067) offers greater re-rating potential as platform profitability stabilises and AI monetisation improves.

The Politburo meeting, held on 30 July 2026, was broadly in line with expectations, with the policy tone shifting marginally towards growth stabilisation. The meeting acknowledged that the economy continues to face a number of difficulties and challenges, and stated that policymakers would plan and introduce pragmatic incremental measures in a timely manner as conditions evolve. This suggests that policymakers are paying greater attention to the recent slowdown in economic momentum and persistent weakness in domestic demand.

However, the meeting did not signal a large-scale stimulus package. The policy focus remains on accelerating the implementation of existing measures and providing targeted, structural support. At this stage, the meeting is therefore better understood as preserving room for further policy action rather than marking the formal launch of a new round of growth-support measures.

For investors, this argues for staying selectively positioned in areas where policy support is already explicit, rather than waiting for a broad, stimulus-driven re-rating across the market.

We remain relatively cautious on China's overall economic outlook. The economy continues to show a clear divergence: consumption, property, and traditional industries remain under pressure, while high-tech manufacturing and new-economy sectors continue to grow at a faster pace.

Faster fiscal implementation and potential incremental measures could provide some support to growth in the second half. In practice, this mainly means the disbursement of already-approved bond proceeds and the execution of existing infrastructure programmes, rather than a newly announced stimulus package, so it is likely to support investment and industrial orders more directly than household consumption — a distinction that underpins our preference for technology exposure over broad consumption-driven plays. However, a broad and strong recovery in domestic demand is likely to take time unless household income expectations, the property-related wealth effect, and private-sector investment confidence improve meaningfully.

The latest PMI data reinforce this assessment. The official manufacturing PMI fell to 49.2 in July, down 1.1 points from the previous month and returning to contraction. The divergence within manufacturing was also pronounced. The PMIs for consumer-goods manufacturing and energy-intensive industries stood at 47.8 and 47.0 respectively, while equipment manufacturing and high-tech manufacturing remained in expansion at 51.4 and 53.3. This highlights the widening gap in business conditions between advanced manufacturing and sectors more closely linked to traditional domestic demand.

This reinforces the case for favouring technology and advanced-manufacturing exposure over sectors tied to a broad domestic demand recovery.

The Politburo meeting once again confirmed that technological innovation, industrial upgrading, and new quality productive forces remain long-term policy priorities, consistent with our two core investment themes within China technology. The meeting reiterated the goal of building a modern industrial system anchored by advanced manufacturing, while also calling for long-term and stable support for basic research and deeper implementation of the "AI+" initiative. This suggests that the meeting was not simply offering a broad positive signal for the technology sector, but was reaffirming that advanced manufacturing and artificial intelligence remain high in the policy hierarchy.

The first theme is onshore technology hardware, a position maintained for its exposure to chips, servers, optical modules and other data-centre-related equipment through the GF CSI All-Share Information Technology ETF (SZSE: 159939). This Politburo meeting does not alter that view; rather, it reinforces the existing investment case.

The investment case is increasingly shifting from a policy-driven theme towards realised earnings. Global AI capital expenditure continues to generate infrastructure orders, while US export restrictions are accelerating domestic substitution across chips, equipment and key components. As hardware sits upstream in the AI value chain, it tends to benefit earlier from capital expenditure, giving the sector relatively strong earnings visibility.

Beyond the near-term earnings visibility this creates, 159939 is not only less dependent on a recovery in domestic consumption and property — the technology hardware and high-end manufacturing segments it covers are also among the areas receiving priority support from policy, industrial investment, and infrastructure capital expenditure. As a result, even if a broad recovery in domestic demand takes longer, the core investment case should remain relatively resilient.

Related article: China has two AI trades right now. Here is why both are worth owning.

The second theme is the iShares Hang Seng TECH ETF, tracked by 3067, which provides exposure to cloud computing, foundation models, and internet platforms. Compared with technology hardware, where AI demand is already translating more directly into orders and earnings, monetisation across the platform and application layers remains at an earlier stage.

This may become increasingly important as the AI investment cycle matures. In the early phase, value capture has been concentrated in hardware and infrastructure, where supply constraints have supported stronger pricing power. Over time, however, value creation may broaden further down the stack as infrastructure supply expands and AI is embedded into products, services, and customer workflows.

Platforms such as Alibaba and Tencent are well positioned for this next phase because they combine AI investment with established customer access, proprietary data, and distribution. Their opportunity is therefore not simply to spend on AI, but to convert that investment into cloud revenue, advertising efficiency, and stronger engagement across existing ecosystems.

A nearer-term catalyst is the recovery in the profitability of core platform businesses. The moderation of the food-delivery subsidy war reduces the need for Alibaba, Meituan, and JD.com to spend aggressively to defend market share. The Politburo's emphasis on rectifying "involution-style" competition — where firms undercut each other on price without any of them gaining a lasting advantage —  strengthens this part of the investment case by supporting a more orderly competitive environment and the healthier development of the platform economy. This suggests that lower subsidy spending may be supported not only by management discipline, but also by a broader policy effort to curb disorderly price competition and excessive investment.

The main risk is that weak household demand continues to weigh on e-commerce, local services, advertising, and other consumer-internet businesses; a renewed escalation in subsidy competition or slower-than-expected AI adoption would also delay the recovery. That said, weak domestic demand is already a broad market consensus and is largely reflected in currently depressed valuations. Unless the data deteriorate materially beyond already-subdued expectations, macro weakness alone is unlikely to trigger a further significant de-rating. A sharper slowdown would, however, raise the odds of more concrete policy support — though how effective that support proves would still depend on its scale, timing, and targeting.

The investment case for 3067 is therefore not dependent on a rapid macroeconomic recovery. It rests primarily on the stabilisation of traditional platform businesses, a sustained moderation in subsidy spending, and continued progress in AI monetisation, with a domestic demand recovery or additional policy support representing an upside catalyst rather than the core assumption.

For 159939, the main risks are a slowdown in global AI capital expenditure, weaker domestic infrastructure demand, or an easing of US export restrictions that reduces the urgency of domestic substitution.

We maintain a positive stance on China technology and recommend gaining exposure through two complementary themes: the GF CSI All-Share Information Technology ETF (SZSE: 159939) and the iShares Hang Seng TECH ETF (HKEX: 3067).

The 159939 theme offers more direct exposure to global AI capital expenditure, domestic substitution and continued policy support for advanced manufacturing. Earnings are projected to grow by 70% in 2026, with a target ETF price of CNY 1.8, implying 73.0% upside.

By contrast, 3067 offers greater exposure to a recovery in platform profitability and the gradual monetisation of AI. As subsidy competition eases, margins stabilise and AI-related revenue improves, the ETF has a target price of HKD 16, implying 57.7% upside. Both figures represent potential upside by the end of 2028.

Chart 1: GF CSI All Share Information Technology ETF’s projection table

GF CSI All Share Information Technology ETF	2025	2026E	2027E	2028E
PE Ratio (X)	68.0	46.8	38.1	31.7
Earnings Growth	45%	70%	23%	20%
Earnings Per Share	0.69	1.16	1.43	1.72
ETF Target Price (CNY) Based on fair PE ratio of 55x				1.8
Upside Potential				73.0%
Source: Bloomberg Finance L.P., iFAST Estimates Data as of 4 August 2026