AI, industrial upgrades fuel bullish sentiment

BEIJING — China's technology-driven industrial transformation is drawing increasing attention from international investors as the global AI boom fuels demand for computing hardware.

Investor enthusiasm for China's high-tech sector was on display recently, when shares of memory chipmaker ChangXin Memory Technologies (CXMT) surged 465.82 percent on their Shanghai STAR Market debut, closing at 49 yuan ($7.26) per share and giving the company a market capitalization of more than 3.2 trillion yuan, making it the most valuable listed company on the A-share market.

Interest in the company has extended far beyond the domestic market, as US-based Tema ETFs added CXMT to its Tema Memory ETF as a top holding with a 10.56-percent portfolio weight.

Broader overseas interest in China's chip sector was evident in the VanEck China Semiconductor ETF, launched in June to provide direct exposure to 25 of the largest and most liquid Chinese companies across the semiconductor value chain, with the fund's total net assets reaching $154.68 million as of July 28.

The International Monetary Fund (IMF) earlier last month raised its 2026 growth forecast for China's economy to 4.6 percent from 4.4 percent in April. This reflects stronger-than-expected first-quarter growth despite the drag from higher global oil prices and weaker demand from trading partners.

The IMF's forecast upgrade is more than a response to short-term data. It represents a broader reassessment of China's industrial upgrading and the structural resilience of its foreign trade, said Yu Song, chief China economist at UBS Securities.

Over the longer term, Song said, China's complete industrial chain is positioned to meet global demand for computing hardware amid the global AI boom, while new quality productive forces are emerging as a sustainable pillar of growth, prompting international markets to reassess the country's growth potential and resilience.

In the first half of the year, the value-added output of China's major high-tech manufacturers rose 13.3 percent year-on-year, outpacing the 5.4-percent growth in the value-added output of all major industrial firms, according to data from the National Bureau of Statistics.

New growth drivers represented by high-tech manufacturing and digital product manufacturing contributed 47.9 percent to the growth in the value-added output of major industrial firms during the period, the data showed.

Standard Chartered said in a recent report that an AI-driven technology cycle was supporting both industrial production and exports, citing customs data that exports of electronic components and computer parts together contributed 6.9 percentage points to China's export growth in the first half of the year.

These structural changes are reshaping how global financial institutions assess Chinese assets.

James Wang, head of China strategy at UBS Investment Bank Research, wrote in a recent note following meetings with European investors that AI remained a key topic in discussions about Chinese equities.

Wang noted that European investors remained confident in China's AI technology sector, and their interest in Chinese biotechnology is stronger than expected, possibly reflecting a search for less-explored areas of Chinese innovation and a desire to diversify beyond AI.

The reassessment, however, remains selective, with investor interest so far concentrated mainly in sectors where China's structural transformation is most visible.

"The most underappreciated aspect of China's economy is the increasing divergence between cyclical weakness and structural strength," said Jacky Tang, chief investment officer for emerging markets at Deutsche Bank Private Bank.

XINHUA