The reality now is that, when it comes to industrial robots, the scale of the US — and in fact the entire West — pales in comparison to China. According to the International Federation of Robotics, China accounted for 54% of all industrial robot installations in 2024, and that percentage is expected to grow in the coming years.
There are similar stats in other areas. Take solar power, for example. Backed by its near-monopoly on rare earth metals, Chinese companies produce over 80% of global solar panels.
Even in areas long the preserve of Western dominance, China is fast catching up. Chinese car brand BYD saw sales in the UK grow by 880% between September 2024 and 2025. Its 11,271 registrations put it ahead of the usual household names like Citroën, Honda and Renault. It also leapfrogged EV rival Tesla by sales over this period.
China is a global manufacturing powerhouse — and increasingly a hub for high-tech developments.
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In the technology sector, China used to have a reputation for being good at copying developments elsewhere. Now, it is the world’s largest R&D spender, leading in many fields beyond the well-known areas, from deep-sea drilling to high-speed rail and nuclear energy. It is also catching up rapidly in other areas, having surpassed the EU in novel drugs, and quickly closing in on the US’s count.
However, the rise of Chinese industry has not been equally matched by its stock market in recent years. Most investors in Asia, and many globally, have ignored the market, filling their portfolios instead with US equities due to their strong performance in recent times.
Despite their gains over 2025, Chinese equities are still below where they were five years ago. In comparison, both the MSCI US and MSCI UK have more than doubled over the same period.
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As history tells us, past performance is not an indicator of future performance. Yet many investors are overexposed to the US, and inadequately diversified, both in terms of geography and asset class.
China has been overlooked as an investment market for the past several years. It may not be for much longer, however.
Politics and property
Much of the Chinese market’s underperformance in recent times can be attributed to a property bubble bursting, as well as political decisions taken by the government.
The phenomenon of “ghost cities” across the country symbolised an overheating property market in the 2010s. The poster child for the bubble was Evergrande. The company was worth over US$50 billion at its peak in 2017 and was responsible for hundreds of projects — largely financed by debt. In 2024, proceedings to wind the company up were issued, and it was finally delisted last year.
While the property bubble was bursting, the government also moved to reduce the power of large tech companies. Jack Ma, co-founder of Alibaba, temporarily disappeared from public view shortly after appearing to criticise the Chinese regulator, while his fintech Ant Group’s US$37 billion IPO was suddenly stopped.
To cap it all off, Chinese and US trade frictions became increasingly pronounced. This meant increasing tariffs, higher costs, and limited access to technology like semiconductors. All these have stunted Chinese valuations.
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A potential turnaround?
Nothing lasts forever, however, and 2025 saw the beginning of a turnaround, with green shoots appearing for the domestic economy. The Chinese government, noting the poor stock performance of many of its companies, became more business-friendly.
The Chinese government has signalled a renewed commitment to private enterprise, with stronger backing for domestic tech champions. Support for the real estate sector and fresh liquidity for growth companies reinforce the sense of a meaningful policy pivot.
As Chinese household bank savings have now risen to a total of US$1.67 trillion ($2.14 trillion) — three times the historical average — policymakers are poised to address underlying housing challenges and domestic consumption more decisively this year.
A commentary published in the first issue of 2026 of Qiushi Journal, a flagship magazine of the Communist Party of China Central Committee, stressed that more supportive real estate policies must be introduced in “a decisive and comprehensive manner”, rather than employing a piecemeal “drip drip” rollout.
Beyond domestic politics, some of the combative trade talks of 2025 have shone a light on the innate strength of the Chinese economy. For example, despite the wide awareness of China’s monopoly on rare earth minerals, others have struggled to build capacity of their own at the scale required.
All this has enabled Chinese companies to stage something of a recovery of late. Between the start of the year and the start of November, the MSCI China Index grew 30%. Even after this growth, there remain numerous companies with attractive valuations.
A strong start to 2026
At the start of the New Year, there are further reasons to be optimistic about investing in China.
Economic data released in January revealed that China posted a record trade surplus of US$1.2 trillion last year, helped by strong export growth to Asean, Africa, Europe, and Latin America. The statistics further underscore China’s global trade competitiveness, continued industrial strength and diverse export markets.
While China’s services activity grew at its slowest pace in six months in December, indicating that domestic consumption has not yet recovered, this could be partly explained by a decline in tourist arrivals from Japan amid ongoing geopolitical tensions. Nonetheless, business sentiment strengthened, rising to a nine-month high, fuelled by forecasts of improved market conditions.
On balance, then, the signs for 2026 are encouraging, further bolstering the investment case for including Chinese equities as part of a globally diversified portfolio.
Challenges remain
With a fast-developing base and relatively low valuations, China can offer investors an opportunity. Yet challenges remain.
Many column inches have commented on Chinese demographic challenges, while trade relations between China and the US remain uncertain.
On top of this, there are differences between the Chinese and US market to be aware of.
In the US, there are many industries with dominant established players which are relatively secure in their position. The Magnificent Seven are the biggest examples, but even outside of technology, there are lots of companies that would be hard to challenge in the short term. Think about the brand power of Coca Cola or McDonald’s, or the logistical hurdles required to compete with Walmart, for example.
In contrast, the Chinese industry is younger, with more challengers, and the big players are less able to rely on inertia to carry them forward. Although BYD is over 20 years old, most of its explosive growth has occurred in the past five or so years. Temu is a recent household name, challenging established players such as Alibaba and Shein in a way few Western companies could challenge Amazon.
Potential diversifier
Looking ahead in the longer term, Chinese markets may occupy an interesting place as a diversifier within portfolios.
Over the past five years, US markets have been dominant in global portfolios, rising sharply while Chinese equities declined. But markets can shift, and money has to go somewhere. Given China’s low correlation with US markets, a US pullback could mark China’s moment to shine.
Martin W Hennecke is head of Asia & Middle East investment advisory at St James’s Place
