Complete chains, inclusive capital market reforms boost nation's appeal

China's artificial intelligence investment opportunities may be undervalued, forming part of the country's distinctive investment set for foreign investors, underpinned by its growing innovation capabilities and inclusive capital market reforms, a senior executive said.

"If you compare that globally, we could argue that the AI opportunities in China are currently undervalued," Jason Yu, Schroders CEO for Hong Kong and wealth lead for Asia, told China Daily during a recent forum in Beijing hosted by the China Securities Regulatory Commission and organized by the Asset Management Association of China, as part of the Annual Conference of Financial Street Forum 2026.

China offers both long-term structural growth and portfolio diversification, Yu said. While global AI-related stock gains have been concentrated in a small number of technology giants, China has one of the world's largest AI value chains, spanning semiconductors, AI infrastructure, data centers and the power supplies supporting them.

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These supply chains offer different investment opportunities and business cycles, helping foreign investors diversify beyond concentrated exposure to a handful of overseas tech giants, he said. Chinese companies' ability to provide cutting-edge technology at competitive costs further adds to their appeal.

Beyond AI, Yu highlighted innovative healthcare as a promising structural growth theme. Chinese biotech and pharmaceutical companies are developing world-class products in areas such as oncology and metabolic diseases, he said, adding that a maturing innovation ecosystem and robust cross-border deal activity could support further earnings growth.

He also identified opportunities in advanced manufacturing, including robotics, automation, electric vehicles and power equipment.

"I think what stands out is not just the technology of development itself, but the ability of some Chinese companies to apply technology at scale and translate innovation into greater efficiency, new products and competitive advantages," Yu said.

The opportunity offered by China's distinctive strength in turning innovation into scale was also stressed by other global asset and wealth managers.

Also speaking during the annual conference, Iqbal Khan, president of UBS Asia-Pacific, highlighted China's deep industrial base, rich application environment and advancing technological capabilities as foundations for its innovation economy and an important role in future global growth.

Yu also welcomed reforms to make China's capital markets more inclusive, citing the Shanghai-based STAR Market's sci-tech growth tier as an example of how companies with genuine innovation can gain access to public equity financing even before generating substantial profits.

Such reforms could improve financing channels for innovative businesses and expand opportunities for investors, he added.

For asset managers, capturing China's innovation opportunities means identifying companies that can turn technological innovations into sustainable earnings and building portfolios suited to clients' risk and return tolerance, Yu said.

"Our philosophy is that only if we can create value for our clients, then we can grow."

This focus on investment outcomes aligns with China's efforts to nurture first-class investment institutions and shift the fund industry's emphasis from asset growth to investor returns.

Yu said this requires strong research and risk management capabilities, combined with a deep understanding of local markets and client needs. Retirement investing, in particular, calls for a long-term approach and solutions that support clients through different stages of life.

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Yu welcomed the CSRC's approval of the first batch of 18 actively managed exchange-traded funds, saying the products could broaden clients' investment choices and provide additional tools for portfolio construction and risk management.

He also sees potential to better serve mainland clients through the Mainland-Hong Kong Mutual Recognition of Funds scheme, which gives them access to a wider investment universe and enables foreign managers to bring more investment solutions to market.

China's capital market opening-up is moving toward making connectivity broader and more effective for investors, Yu said.

Schroders remains committed to participating in these schemes and delivering long-term returns to mainland clients.

Contact the writers at zhoulanxv@chinadaily.com.cn