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Ian Li Qingcao,CFA
Manager, Research
From Scale Advantage to Technology Lead: China’s Battery Supply Chain and the Case for Exposure
The source of earnings in China’s new energy vehicle supply chain is shifting. Domestic passenger vehicle demand has fallen sharply, yet earnings at the battery cell and materials layers have improved rather than deteriorated. Three factors explain the divergence: the globalisation of energy storage demand, a higher export share, and share consolidation under the new national standard.
Market Access Restrictions: Investment Implications for China's AI Hardware
The FCC is reportedly considering restrictions on new Chinese-made data-centre optical transceivers. Revenue risk is material for directly exposed suppliers, but our two passive vehicles have limited direct exposure — any near-term impact would come through sentiment, not earnings. We maintain the existing framework.
Market Update: US-Iran Ceasefire Collapses, Conflict Re-escalates
The collapse of the US-Iran interim ceasefire has pushed oil prices and geopolitical risk premia higher again. But the repeated on-off cycle only validates our core thesis: the medium-to-long-term case for Chinese equities is anchored in domestic fundamentals, not transient Middle East disturbances.
China's Structural Bull Market Case Still Holds: From Valuation Repair to the AI Engine
Since early 2026, China's tech sector has split sharply: A-share hardware technology has rallied nearly 50% year-to-date, while Hong Kong-listed platform tech has fallen by mid-teens percentages. Most investors see this as "one is good, one isn't." We disagree — it's the same AI opportunity at two different cycle stages, and both still offer upside and deserve portfolio space. This article makes that case and translates it into two earnings-driven allocation ideas.
China's 2Q GDP slowed, but AI and Semiconductors are driving the next growth cycle
China's real GDP grew 4.3% year-on-year in the second quarter, but the headline slowdown masks a structural shift. While real estate investment fell 18.0%, exports surged 18.4%, driven by compute hardware and integrated circuits. AI is increasingly replacing property as China's new growth engine, supported by both economic data and national policy. This report examines the investment case for China's AI and semiconductor sector and highlights our preferred investment opportunities.
China’s AI hardware opportunity: Global compute boom meets accelerating domestic substitution
China's semiconductor rally is now driven by two structural forces: the global AI compute boom and accelerating domestic substitution. While global AI capex fuels demand, China's push for semiconductor self-sufficiency—supported by systems innovation, policy and energy advantages—creates a differentiated opportunity that complements US AI exposure.
China's Monetary Policy Outlook: Will easing return in 2H2026?
In 1H 2026, China’s monetary policy shifted from active easing toward a more cautious, data-dependent stance. The PBoC removed explicit references to RRR and rate cuts, increased its focus on overseas policy and imported inflation, and entered a period of policy observation rather than immediate stimulus.
China’s energy transition playbook: Capturing structural opportunities across the new energy sector
China’s target to double non-fossil energy supply by 2035 underpins long-term growth in solar, wind, storage, and NEV sectors, while strong global demand and China’s supply chain dominance support exports. The China Southern CSI New Energy ETF (516160.SH) provides diversified exposure across the clean energy value chain.
Policy support and valuation re-rating signal it is time to revisit China’s CSI300
The 2026 National Two Sessions signalled a structural policy shift supportive of A-shares, driven by fiscal expansion, “AI+” industrial policies, and accelerated capital market reforms at the start of the 15th Five-Year Plan. Meanwhile, CSI 300 valuations remain historically low, while earnings are entering an early-cycle recovery phase, creating conditions for both earnings growth and valuation re-rating.
Market Update: Q1 GDP at 5.0%, Confirming China’s Structural Resilience
At the start of the war, we argued that China’s structural ability to withstand this energy shock was stronger than market consensus expected. China’s GDP grew 5.0% year on year in the first quarter of 2026, above the widely expected 4.8%, delivering upside surprise growth even during the most severe global energy supply disruption in modern history.
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