While the China share markets have largely been unloved over the last 24 months due to sentiment-driven concerns around regulation, geopolitics, and macro growth, beneath the surface earnings visibility is improving, operational momentum is returning, and strategic sectors like artificial intelligence (AI), electric vehicles (EVs), and semiconductors are beginning to scale making this an inflection point for investors focused on fundamentals. So, how can Australian investors take advantage of this shift and look to gain exposure to China tech stocks as the sector gains traction on the global stage?
Let’s X-Plain:
- What do I need to know about Chinese tech stocks?
- Why invest in China tech?
- Why use an ETF to access China tech?
- How to incorporate China tech into a portfolio
What do I Need to Know about Chinese Tech Stocks?
Chinese tech stocks refer to companies driving innovation across sectors like electric vehicles, semiconductors, artificial intelligence (AI), robotics, automation, and digital platforms. These firms play a growing role in China's economic transformation and are listed across a range of domestic and international exchanges. Among the most widely followed are A shares and H shares.
A shares are listed on mainland exchanges such as Shanghai and Shenzhen and traded in renminbi. These companies are typically more domestically focused and closely aligned with national policy priorities, including smart manufacturing, robotics, AI infrastructure, and industrial automation. They tend to have smaller market capitalisations (though not always), reflecting their role as earlier stage innovators and emerging national champions. Access to A shares has expanded significantly through the Stock Connect program, which allows global investors to trade mainland-listed companies via Hong Kong.
H shares are listed on the Hong Kong Stock Exchange and traded in Hong Kong dollars. These companies are generally larger and more established, often with greater offshore investor participation and international visibility. They tend to operate across cloud services, platforms, and e-commerce, offering scale and liquidity.
While Chinese tech stocks can be listed in other formats as well, a combination of A and H shares offers a more complete view of China’s technology landscape from globally recognised giants to domestically scaled innovation leaders.
Well known examples include Tencent, Alibaba, and BYD, alongside A-share names like CATL, NAURA Technology, and Shenzhen Inovance, which are shaping the next wave of China's innovative transformation.
Why Invest in China Tech?
Investing in China’s tech sector offers exposure to a rapidly advancing digital economy, which is projected to account for over 55% of the country’s GDP by 2030, making it a key structural driver of growth across all industries, not just the technology sector. China’s cost advantage in deploying large AI models, over 90% lower than in the US, gives its enterprises a significant edge in scaling and monetising AI applications. Government policy is now closely aligned with commercial outcomes, emphasising the deployment and economic impact of technologies such as semiconductors, robotics, and AI, rather than just research targets. Furthermore, China’s dominance in key innovation-led sectors, such as accounting for over 60% of global EV sales in 2024 and roughly 30% of the global industrial robotics market, highlights its growing global influence in the future of tech.
Why use an ETF to Access China Tech?
ETFs are designed to offer investors transparent, pure-play access to a specific area of the market. Essentially, this means funds like the Global X China Tech ETF (ASX: DRGN) ‘do what they say on the label’ by providing exposure to a targeted basket of China tech stocks.
DRGN for instance invests in a balanced mix of 20 stocks, across 11 tech-aligned industries to capture both domestically focused innovators and globally oriented tech leaders all in one trade without having to select individual companies. Its transparent, rules-based methodology emphasises financial health, favouring companies with strong revenue and earnings growth, good liquidity, and solid free cash flow, while filtering out persistently unprofitable firms. With quarterly rebalancing and capped exposure per stock, it provides diversified, disciplined access to China’s innovation-driven economy, beyond what traditional emerging markets or tech indices typically offer.
An additional benefit to using ETFs to access overseas markets such as China, is they are generally more cost-effective and remove the need to navigate the complexities of investing via an international stock exchange.
How to Incorporate China Tech into a Portfolio
Country specific ETFs such as DRGN are more widely used in the satellite portion of a core and satellite portfolio model. Here are three possible ways to incorporate China tech into a well-diversified portfolio:
- A strategic allocation for investors seeking exposure to China’s domestic innovation push, as the country shifts from platform dominance to advanced manufacturing, robotics, and AI commercialisation.
- A complementary position alongside global tech or EM strategies that may underrepresent A-share or industrial tech exposure, helping broaden the scope beyond familiar mega-caps.
- A differentiated entry point into China’s structural tech transformation, targeting sectors aligned with government priorities and supported by rising capital expenditure in digital infrastructure, automation, and smart industry.
