China's misunderstood advantage — innovation that the market still discounts
Global investors remain fixated on China’s macroeconomic slow-down and geopolitical risk, yet they continue to miss the country’s accelerating innovation curve. In a world starved of growth, we believe that this mispricing presents a once-in-a-lifetime investment opportunity. Portfolio manager JC XUE highlights why China’s tech-led momentum remains one of the least-appreciated sources of future equity returns.
A quiet AI revolution
Headline writers still call China a copy-and-paste economy — yet the facts differ in many areas of modern innovation. For example, China now ranks among the world’s top developers of large language models. DeepSeek — released this year — rivals ChatGPT and other US LLM models, though trained at a fraction of the cost. Video-generation model Kling and agent platform Manus add breadth to the Chinese AI ecosystem. Chinese firms are launching hundreds of new AI algorithms each month and are on track to expand the AI ecosystem by a further 50 % by 2026. Tencent and Alibaba already sit inside the global top 10 for AI models, yet still trade at the low valuations accorded to mature utilities companies rather than high-growth innovators.
Chips, batteries and robotaxis
US export controls were meant to choke Chinese semiconductor progress: instead, they have accelerated it. SMIC is the leading Chinese chip manufacturer. Once a decade behind TSMC, SMIC has narrowed the lag to roughly five years. It is shipping advanced chips produced on older equipment to smartphone and AI clients.
In mobility, Baidu’s driverless taxis already operate without safety drivers in five Chinese cities and will debut 100 vehicles in Dubai by year end. The battery story is similar: CATL’s latest battery achieves 500 km of driving range from a five-minute charge — five times Tesla’s speed — while sodium-ion chemistries promise cheaper, safer storage. Two-thirds of all humanoid-robot launches since 2022 have also come from China.
Cultural edges the market forgets
Rapid execution is embedded in the Chinese national psyche. China built the world’s largest high-speed-rail network in a decade. A comparable urgency drives electric charging, battery supply chains and data-centre construction. Resilience is equally visible. Market leader Huawei built its own phone chips, operating system and even an electric vehicle platform within four years of US sanctions. A deep talent bench sustains the pace: China now graduates more than four times as many scientists and engineers as the US — and almost twice as many PhDs.
Valuation gap too wide to ignore
While there are undeniable governance and political risks to investing in China, investors are overlooking a deep valuation gap. Giant US wholesaler Costco trades on more than seven times the price-earnings multiple (PE) of China’s JD.com, despite the latter’s faster growth. Baidu — already monetising robotaxis — trades a single-digit PE, while Tesla’s outsized valuation assumes multi-billion-dollar robotaxi revenues still years away from being earned. At what point does the valuation gap no longer make sense?
History offers a lesson
History suggests that global superpower dominance follows national technological advancement. China led globally until the 1500s; the Netherlands followed with shipbuilding prowess, then the UK with the industrial revolution, and, more recently, the US with computing and nuclear tech. In a threat to US exceptionalism, the innovation wars now favour China.
Foord positioning: We remain overweight carefully selected Chinese innovators: platform companies integrating AI across their ecosystems. We are also actively evaluating opportunities around supply-chain champions in batteries and semiconductors. Misunderstanding is a prerequisite for opportunity — and China still offers plenty of both.