Tech innovation key as foreign investors bet on China

BEIJING -- China's surging technology innovation is rewriting the playbook for foreign investors, with the country's booming tech sector having reshaped expectations regarding its long-term growth potential.

The latest example came as Goldman Sachs unveiled a list of what it has identified as China's Prominent 10, a move reminiscent of the Magnificent Seven, a group of high-performing and influential stocks in the US tech sector.

The top 10 Chinese stocks, most of which are affiliated with tech giants, are expected to significantly expand their share of China's equity market over the coming two years.

Among these 10 are internet behemoth Tencent, e-commerce giant Alibaba, smartphone maker Xiaomi, electric car manufacturer BYD, digital shopping platform Meituan and pharmaceutical company Hengrui.

They "embody the theme of AI/Tech development, self-sufficiency, going global, services and new forms of consumption, and China's improving shareholder returns," according the investment bank's research findings.

Behind the stock picks spreadsheets of Wall Street economists lies a deeper recalibration, with those observers who once declared "peak China" now overhauling their models, and transitioning to a view which sees tech innovation as driving a new wave of substantial expansion in China.

Last month, MSCI added five A-share stocks, including VeriSilicon, Baili-Pharm and APT Medical, to its China Index. These new constituents are mostly in tech and biotech sectors, reflecting global index compilers' recognition of China's economic transformation.

Top global investors, including Goldman Sachs and JP Morgan, have turned bullish on China's market -- driven by global investor interest in Chinese equities due to the country's AI push, led by DeepSeek. This month, notably, major investment banks have raised their growth forecasts for the Chinese economy.

As of May 29, the Hang Seng Tech Index had surged over 40 percent year-on-year, outperforming major global tech indices. Of the top ten most actively traded Hong Kong stocks, seven are Hang Seng Tech constituents, with the three most active being Tencent, Alibaba and Xiaomi.

China's AI breakthroughs highlight its supply chain and innovation strengths, supported by a robust ecosystem of infrastructure, data, talent and energy, said Xing Ziqiang, Morgan Stanley's chief economist for China.

"China's tech innovations are shifting from isolated breakthroughs to systematic integration, with many fields experiencing their 'DeepSeek moment' and some emerging tech firms achieving a global presence from the start," said Wu Qing, head of the China Securities Regulatory Commission, at a forum in East China's Shanghai on Wednesday.

Additionally, tech stars like DeepSeek and Huawei weren't included in Goldman Sachs' stock picks only because they're not publicly traded. Beyond these giants, many Chinese startups are rising to prominence. China now has more than 400 unicorn companies, nearly one-third of the global total.

The country's recent economic data also support such an outlook.

Data from the National Bureau of Statistics shows that China's high-tech manufacturing added value grew by 8.6 percent in May, outpacing the overall growth of large-scale industrial added value by 2.8 percentage points.

Within this sector, production of 3D printing equipment, industrial robots and new energy vehicles increased by 40.0, 35.5 and 31.7 percent, respectively.

China is not only the largest market but arguably also the world's innovation hub, propelling cost efficiencies and next-gen robotics development, said a Morgan Stanley research note recently.

"It is becoming apparent that national support for 'embodied AI' may be far greater in China than in any other nation, driving continued innovation and capital formation," said Zhong Sheng, Morgan Stanley's head of industrials research.

"The continuing AI and technology breakthroughs have rewritten the narrative and brightened the growth prospects" for China's privately-owned enterprises, who also lead the charge of "China's 'Going Global' ambition," according to the Goldman Sachs report.

This year, overseas demand for China's AI-driven tech products has surged. Data from AliExpress reveals that during its March promotion, sales of AR/VR glasses, led by brands like XREAL and Rokid, had jumped 600 percent from the previous month.

"Last year, our AR glasses' overseas business accounted for nearly 70 percent of total sales, with overseas sales growing by 30 percent year-on-year," said Zhang Longjie, global sales head of consumer-grade AR glasses firm XREAL.

Despite global uncertainties, China's high-tech product exports performed strongly in the first five months of 2025 -- rising 6.1 percent year-on-year in US dollar terms, according to the General Administration of Customs data.