China – still the Yuan?

Jan 26, 2026

Touching down in China, we were struck by the intriguing blend of ancient heritage and modern innovation. From the 2,000-year-old Terracotta Army to cutting-edge EV technology in Shenzhen's gleaming skyscrapers, the country presents striking contrasts.

Key takeaways

  • A leader in tech innovation: China demonstrated its strong AI capabilities at the start of 2025 with the release of DeepSeek's open-source AI model. Furthermore, its significant cost advantages from lower energy prices mean it is rivalling the US.
  • An ‘anti-involution’ drive: overcapacity is problematic in certain sectors, however the government is targeting excessive internal competition and the resulting issues of overcapacity and price wars in areas such as solar PVs.
  • Luxury brands: the sector has been relatively resilient post Covid, and from an investment perspective, domestic Chinese heritage brands, particularly in luxury jewellery, are emerging.
  • Hong Kong’s buoyant IPO pipeline: in the fourth quarter last year, the number of applications surged past 320. The majority are mainland companies seeking dual listings, however unicorn companies are also looking to go public.
  • The importance of skilled active management: inefficiencies in the emerging markets equity universe reinforce why disciplined, bottom-up stocking picking is essential in China’s equity market.

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