Nasdaq Golden Dragon China Index jumped 2.83 percent on Tuesday
While China is undergoing economic restructuring featured by the rapid development of new quality productive forces, the capital market will also be buoyed by emerging industries and technologies, said experts.
While the US stock market tumbled for two consecutive days this week, with the Nasdaq and S&P 500 shedding over 4 percent and 3.5 percent, respectively, the Nasdaq Golden Dragon China Index — which tracks US-listed Chinese companies — jumped 2.83 percent on Tuesday.
Morgan Stanley's data showed that the Chinese stock market received a total net capital inflow of $3.8 billion in February, with passive funds making the greatest contribution.
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KWEB, an exchange-traded fund managed by US asset manager KraneShares, has seen over $1.7 billion of net capital inflow since February. The ETF mainly tracks Chinese internet-related listcos such as Tencent and Alibaba.
The MSCI China Index has risen nearly 18 percent so far this year. While the benchmark Shanghai Composite Index slipped 0.23 percent on Wednesday, combined trading value on the Shanghai and Shenzhen bourses exceeded 1.5 trillion yuan ($210 billion).
Emerging technologies such as artificial intelligence and humanoid robots — as well as new energy vehicles, lithium batteries and photovoltaic products — will be translated into more "catalyzing factors" in the Chinese capital market this year, attracting more investment to nurture innovation, said Zhu Haibin, chief China economist at JPMorgan.
Zhu said the sudden emergence of DeepSeek reflects China's capabilities in innovation.
Although emerging industries have registered rapid growth over the past few years, there is still much room for them to increase their weighting in China's economy. Strong growth momentum in this aspect is also conducive to the stabilization of China's economic restructuring, he added.
The China Securities Regulatory Commission, the country's top securities watchdog, on Tuesday said it will step up support for technological innovation and the development of new quality productive forces.
The fundamental mechanisms will be more inclusive and adaptive. Quality tech firms that are not yet profitable will also be supported for bourse listings, said the CSRC.
Progress has been made. AI companies, and the technology sector in general — including computer, software and telecommunications-related firms — have seen their weighting in total A-share market valuations rise significantly since 2020, said Meng Lei, China equity strategist at UBS Securities.
This is in line with the CSRC's strengthened support for technological innovation, said Meng.
Meanwhile, the A-share market will see 1.7 trillion yuan of long-term capital inflow this year, which will facilitate the market's structural improvement and exert a positive impact on market performance, he said.
In addition, an average 6 percent year-on-year increase in A-share companies' profitability can be expected this year. China's moderately rising inflation, stabilizing economic development and the implementation of relaxed policies will help with the recovery, Meng added.
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Yu Xiangrong, chief China economist at Citigroup, wrote in a report on Tuesday that the bank has raised its forecast for China's real GDP growth in 2025 from 4.2 percent to 4.7 percent, and that for 2026 from 4.1 percent to 4.8 percent.
The rise of new growth engines, best represented by AI, and the recovery of former economic drivers such as the property market, are the major reasons for Citigroup to revise its forecasts, said Yu.
Lu Ting, chief China economist at Nomura, said that they have noticed from the recent A-share market rally the results of the so-called wealth effect, under which scenario people tend to spend or invest more if their asset values rise.
The rally has also taken into account the revaluation of Chinese listcos. The quick recovery in trading value has directly stimulated the country's GDP growth, Lu said.
