The Global X China Tech ETF (DRGN) is officially available on the ASX as of Thursday, offering exposure to companies listed in China and Hong Kong at the helm of the region’s burgeoning tech sector.
The year kicked off with the emergence of DeepSeek-V3, a cost-effective AI model from a Chinese start-up, which sent ripples through global markets and signalled a shift towards an emphasis on not only power, but efficiency in AI.
But according to industry pundits, the case for Chinese tech extends far beyond DeepSeek – and its emergence is far from a happy accident.
Speaking to InvestorDaily, Global X senior investment strategist Billy Leung said China’s AI acceleration has been more than a decade in the making, with the country following a deliberate path from manufacturing leader to tech innovation hub.
“This is not by luck or by chance,” Leung said.
“If we look at 2025 – and why there are so many Chinese companies making headlines – it’s because, 10 years ago, there was actually a Chinese government policy, called Made in China 2025.”
The national policy, tabled in 2015, sought to, among other things, cement the world’s second-largest economy in key tech industries, including semiconductors, AI, robotics, electric vehicles and green energy.
Today, China has become a global leader in multiple verticals, Leung said.
“BYD, which is probably now the largest – not the largest in terms of market cap – but it’s probably the largest EV producer in the world now, right now. So they produce close to twice of what Tesla is producing in terms of EV vehicles,” Leung said.
“We also have in China a company called CATL – so this is now the largest EV battery manufacturer in the world, with about 40 per cent market share … We also have companies such as Hygon, which is one of the largest semiconductor names globally.”
According to Leung, China’s technology theme isn’t speculative. In fact, he expects companies operating in this space to shift China towards self-sufficiency and yield a more competitive global technology ecosystem.
Overall, he said, China’s big tech players are currently more attractive than their US counterparts.
“Valuation wise, if you look at the Chinese names, especially the top 10 or top seven Chinese tech names, compared to Mag Seven, they’re trading at a valuation discount of 30 to 40 per cent. So it’s like a tech pivot, and also a US pivot,” he said.
Notably, the size of China’s digital economy has more than tripled over the last 10 years, reaching over US$9 trillion in 2024. Its share of gross domestic product has risen from 27 per cent to 45 per cent over the same period, with forecasts pointing to further growth to 57 per cent by 2030.
China’s rising tech dominance is being cited by multiple fund managers, with Russell Investments’ director of investment research, Tom Warburton, highlighting the government’s tech focus in a note this week.
“Several positive trends are developing within China. In addition to the DeepSeek launch underscoring increased competitiveness in AI, a more constructive stance around technology is emerging from the Chinese government,” Warburton said.
“The improving environment for both the consumer and technology sectors is also reviving interest in China’s EV market, with investors becoming increasingly bullish on Chinese EV manufacturers.”
Innovate or fall behind
Aside from increasing its global appeal, China has another reason to home in on local innovation, according to Leung.
Notably, China’s population is one of the fastest ageing in the world, with data from the World Health Organisation revealing that more than a quarter (28 per cent) is projected to be over 60 years old by 2040.
As such, the world’s second-largest economy will need to become expert innovators, said Leung, adding that when it comes to becoming a tech powerhouse, “it’s not a matter of if, it’s a matter of when”.
“China is moving away from being a manufacturing hub into an innovation hub. They need to do that in order to sustain that next phase of economic growth,” he said.
“The US went through it. They were really struggling in manufacturing, and they sort of moved the value chain into innovation. And this is what China is doing right now.
“They kind of need to innovate, need to increase productivity, which is why they’re strong at robotics right now. It’s not because they’re scared about the economy, they’re scared about the ageing population in about 20 years’ time. So I think that’s why there is that urgency, a commitment and an investment by China into innovation and into tech,” the investment strategist said.
Tech boom is ‘borderless’
While China’s economy faces several headwinds, optimism is building as US–China trade talks are set to begin this week in Switzerland.
Moreover, earlier this week, alongside monetary policy-easing measures, the People’s Bank of China announced several other stimulus measures to support the economy.
ING’s chief economist for greater China, Lynn Song, believes that the timing of the announcements was deliberate to coincide with the US–China trade talks.
“This way, the easing won’t be seen as a knee-jerk reaction to tariff developments,” she said.
“Policymakers are likely now privy to some of the early data on how the economy is being impacted by the tariff shock. And perhaps most importantly, the worst of the depreciation pressure on the CNY has faded.”
But Leung told InvestorDaily that while the impact of China’s stimulus measures will take time to materialise, the long-term investment appeal of the country’s tech sector remains strong.
He added that China’s “borderless” tech boom will also be largely insulated from escalating trade tensions, given that the US is broadly focused on goods and manufacturing.
“The US is targeting manufacturing, not innovation, because innovation is borderless, right? When you innovate, you can’t control the trade, it’s a services trade. So it sort of is a good mitigation factor,” he said.
“Trump can’t do anything to suppress that, because they’re not exporting that. So it’s sort of like the best way to be exposed to China.”
