China’s AI boom and Xi’s private sector support fuel market optimism, but US tariffs loom
Investors fret over the impact of US tariffs on China’s economy and markets, with analysts predicting a potential GDP slowdown
China’s onshore investors are increasingly optimistic about the outlook for the mainland’s economy and financial markets, following an artificial intelligence (AI)-led rally and an official embrace of entrepreneurs, but uncertainties including strained US-China relations could complicate the picture, according to global banks.
Local governments and companies, particularly in China’s more developed coastal regions, were prepared to boost AI-related investments and spending, and “animal spirits” in the economy may have recovered to some degree, according to a Goldman Sachs report.
“Following recent AI developments, clients [have] turned slightly less bearish on China’s long-term potential growth,” said the report, which was based on feedback from clients, including mutual funds and asset managers it met in Beijing, Shanghai, Guangzhou and Shenzhen over the past week.
The markets have turned bullish since AI start-up DeepSeek released two models built at a fraction of the cost of their Western counterparts, sparking a rally in the shares of mainland Chinese tech companies and the broader market in Hong Kong, as investors expect their integration into their business models to drive earnings higher. The Hang Seng Tech Index has jumped 28 per cent year to date, while the benchmark Hang Seng Index has added 17 per cent.
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Chinese President Xi Jinping holds rare meeting with China’s top entrepreneurs amid US tech rivalry
A meeting last month where President Xi Jinping assured China’s top entrepreneurs of sustained government support has also acted as a catalyst. He pledged stronger protection for entrepreneurial interests and broader market access, while calling for greater technological innovation amid intensifying trade tensions with the US.
Goldman said in the report that onshore investors also expected the country’s property sector, which has been suffering from a protracted downturn, “to become less of a growth drag in the medium to long-term” following recent increases in home sales and prices in large cities.