2025 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 the case for Chinese tech extends beyond DeepSeek, according to Global X, with the start-up’s low-cost model representing just one facet of a broader repositioning of the world’s second-largest economy.
Global X investment analyst Justin Lin explained that, since then, companies like Alibaba, Ant Group and Tencent have released or updated a range of open-source, multimodal and industry-specific models, with applications ranging from healthcare to finance.
“China’s playbook – open-source innovation, localised hardware and real-world deployment – is setting the stage for an AI future not dominated by Silicon Valley alone,” Lin said in a recent report.
To capitalise on this potential, the exchange-traded fund (ETF) provider this week announced the upcoming launch of two new investment vehicles to its thematic suite – the Global X Artificial Intelligence Infrastructure ETF (AINF) and the Global X China Tech ETF (DRGN).
Expounding on the launch of the latter, in particular, the firm said that the world’s second largest economy is home to some of the globe’s most dynamic and disruptive tech companies.
But this isn’t the result of a rapid development, despite the hype around DeepSeek virtually exploding overnight, with senior investment strategist Billy Leung telling InvestorDaily that China’s ambition for leadership in tech is a decade in the making.
“The Made in China 2025 policy (launched in 2015) laid the foundation for leadership in semiconductors, AI, EVs and robotics, not just as growth sectors but as national priorities,” he said.
And unlike Silicon Valley’s decentralised model, Leung explained that China’s approach has maintained a focus on being long term, state supported and increasingly executed by the private sector.
“It marks a shift from industrial catch-up to innovation leadership, supported by deep infrastructure and domestic supply chains,” he said.
“Recent momentum reflects a combination of local execution and global demand trends. Since the start of the year, China has demonstrated its ability to scale large language models with inference costs now more than 90 per cent lower than US peers.”
As such, the ETF provider said, Chinese developers are offering leaner, open models that undercut Western pricing.
According to Leung, this cost advantage has enabled broad commercial rollout across a number of sectors. Meanwhile, external pressure from export controls and tariffs has reinforced China’s strategic focus on localisation.
“While sentiment remains sensitive, the policy direction and funding support are clearly aligned,” he added.
Moreover, following China’s annual “Two Sessions” gathering in Beijing last month, national leaders also reaffirmed their commitment to integrating technological and industrial innovation, aiming to unlock the creativity of the digital economy.
The government’s focus on AI and software could prove a structural advantage. While US hyperscalers like Amazon, Alphabet, and Microsoft are pouring in more than US$255 billion into AI technologies and data centres this year, DeepSeek has shown that more can be achieved with fewer resources.
In the case of Alibaba – one of the country’s largest tech companies – it recently unveiled a next-generation AI model capable of processing text, images, audio and video. Notably, it’s also light enough to run directly on phones and laptops.
As such, Global X believes that moves like this reflect a growing Chinese strategy: make powerful AI smaller, cheaper and more deployable.
As for which sectors will benefit the most, Leung said AI infrastructure, semiconductors, cloud computing and industrial robotics are seeing the strongest tailwinds.
“China already accounts for more than 60 percent of global EV sales and around 30 per cent of the industrial robotics market. These sectors are scaling, globally competitive and backed by national targets,” Leung said.
“Local execution is translating policy ambition into commercial impact.”
China’s long-term outlook remains strong, with its digital economy expected to exceed 55 per cent of its gross domestic product by 2030, the investment strategist said – underscoring the key role technology plays across industries.
“This is not just about internet platforms. It is about digital transformation in logistics, manufacturing, services and automation,” he said.
“Technology is now central to China’s productivity agenda and national growth strategy. That is the foundation for long-term investability,” Leung added.
ETF provider Betashares told InvestorDaily last month that it remains constructive on Chinese equities, in large part because of the strides the country is making in tech.
“It’s really coming back to that AI narrative, that technology narrative,” Betashares investment strategist Hugh Lam said last month.
“DeepSeek really shocked markets in late January. It showed the world that Chinese entrepreneurship and the private sector can really develop leading-edge AI models, and that’s brought a lot of optimism.
“They’re going all in.”
According to Lam, any companies that have, or utilise, software applications are poised to benefit.
“What China has really shown is that software really could be a key advantage for them, because, again, DeepSeek is really trained on, probably cheaper, slightly less efficient Nvidia chips. So it showed that more can be done with less,” Lam said.
