The Chinese stock market has recently captured the attention of both local and international investors, displaying a remarkable surge in trading volumes that have approached a staggering 20 trillion yuan since last FridayBy Monday, the market once again reached this pivotal trading volumeThis surge in trading activity has noticeably influenced price increases across various sectors, with many stakeholders adopting a more optimistic outlook toward both A-shares and Hong Kong stocksNotably, foreign investment banks have shown a bullish stance towards Chinese equities, greatly boosting the confidence of domestic investors as well.

Among the major developments is the emergence of DeepSeek, a Chinese artificial intelligence startup that has started to shift the perception of international investors who had previously placed their faith solely in American tech stocksThe rise of AI in China has been significant, with various applications such as humanoid robots gaining momentum this year, leading to a substantial increase in investment returns within this sectorExperts predict that humanoid robotics could very well become this year's overarching investment theme.

In addition to this trend, multiple policy measures have been rolled out to propel reforms in the capital marketsThese measures have been dense and frequent, especially leading up to the Chinese New Year, when multiple governmental departments collaborated to entice long-term investments into the marketThis has significantly bolstered investor moraleAccording to a research report released by Deutsche Bank’s head of research in Asia-Pacific, Marek JKLang, the year 2025 will be pivotal for global investors seeking to reassess China's international competitivenessChinese companies continue to establish significant advantages in high-end manufacturing and services, reshaping the competitive landscape through disruptive innovationsIt is anticipated that the valuation quality of Chinese stocks will gradually rise.

Lang highlighted two key advantages that position China favorably in the global market: the first being its prowess in automation, where Chinese industrial robots account for 70% of the global total, driving productivity improvements and wealth accumulation

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The second advantage is found in the "economic corridor" opportunities created by the Belt and Road Initiative, which has deepened connections between China and markets in Central Asia, West Asia, the Middle East, and North Africa, unlocking significant potential opportunitiesIn light of a structural shift towards consumption-focused policies and supportive financial opening policies, Lang predicts that the bullish cycle for A-shares and Hong Kong stocks will commence in 2024 and could potentially lead to new peaks in the medium term.

This aligns closely with my own analysis and forecastsIn my top ten predictions for 2025, I emphasized that following a decisive policy turnaround, both A-shares and Hong Kong stocks would see a resurgence of momentum, leading to enhanced profit opportunitiesA thriving stock market is crucial for promoting economic transformation and boosting consumption, serving as a key solution in breaking through current challengesLang elaborated on the evolution of Chinese manufacturing from its early establishment within the textile sector to its dominance in traditional fields such as electronics, steel, shipbuilding, and home appliances—including a recent leap into advanced industries like telecommunications and high-speed railNotably, the swift rise of China's automobile exports in 2024 has caught global attention due to their competitive pricing relative to existing comparable models, positioning China as a major provider of high-performance electric vehicles.

China's manufacturing strength is irrefutable, contributing to 30% of global manufacturing value added, while its service industry stake is climbing rapidlyNotably, nearly every global industry now features Chinese leading enterprises, suggesting that the proportion of global market capitalization attributable to Chinese equities is expected to increase further.

Moreover, China is in the process of constructing a comprehensive industrial chain, nurturing specialized industrial clusters akin to Silicon Valley, and achieving profound collaboration between academia and industry

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In the electric vehicle sector, China holds 70% of the relevant patents, while it also dominates in telecom equipment for 5G and upcoming 6G technologies, contributing nearly half of the total global patent applications in 2023. Deutsche Bank underscores that the anticipated launch of the low-cost AI system DeepSeek in 2025 will attract significant global attention, reflecting China's intellectual property achievements recognized on an international levelAs China continues to break ground in high-value-added sectors, it is simultaneously creating distinct competitive advantages across the entire industrial chain at an unprecedented paceThe globalization efforts of Chinese enterprises are likely to reduce valuation discounts and could even lead to premiums over timeIn the medium term, international investments are expected to increasingly favor Chinese assets, suggesting that both A-shares and Hong Kong stocks will likely maintain an upward trajectory.

The research report emphasizes that investors who favor companies with significant economic moats should note that such advantages currently lie with Chinese firms, rather than their Western counterpartsBy 2025, the Chinese stock market is slated to enter a long-term bull phase, capturing the keen interest of global investorsIn light of the uncertainties surrounding Federal Reserve policies, declines in manufacturing capabilities across Europe and North America, along with waning competitiveness among Western companies, there is potential for substantial reallocation of global capital towards the Chinese marketAccording to Deutsche Bank, the MSCI China Index is trading at a record 10% discount to the MSCI Global Index's price-to-earnings ratio, and it sits close to the lower end of its valuation rangeAs Chinese enterprises rise globally, such valuation discrepancies appear poised to transition into premium statuses.

Notably, Deutsche Bank suggests that investors will need to pivot toward China rapidly, as finding exposure to Chinese equities without inflating stock prices could become challenging

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Recommendations from the Deutsche Bank report include focusing on companies in areas like new energy vehicles, semiconductors, artificial intelligence, as well as market-leading manufacturing firms and globally competitive high-end service companies.

It is not just Deutsche Bank that harbors a favorable view of the Chinese market; other foreign banks like Goldman Sachs have joined the frayGoldman Sachs has forecasted a 14% upside for the MSCI China Index by 2025, suggesting a 20% potential return from Chinese tech stocks following a revaluationThey emphasize that China’s policy environment has shifted from anticipated to implementation phases, with the details and subsequent actions being critical for stabilizing growth and supporting corporate profitability, ultimately driving the stock market higher.

The latest bull market commenced following the implementation of the comprehensive policy announced by the central government on September 24, 2024, with the current phase representing the initial stages of a second surgeThe breakthroughs achieved by DeepSeek have raised questions regarding the efficiency of Western technology trajectories, leading to a dramatic 16.97% drop in NVIDIA’s market cap on January 27—compounding evidence of a preferential edge these developments afford to Chinese AI companies in accessing international marketsThis capability not only opens avenues within global South markets but also accelerates the dissemination of technology by exploring algorithmic optimizations, moving beyond sheer computational power accumulationDeepSeek’s success undoubtedly marks a pivotal shift in China’s trajectory from technological imitation toward original output, with its widespread model applications abroad signifying the global recognition of Chinese intellectual property value.

Goldman Sachs further notes that China's advantages in the AI software domain are significant, with profits from software firms—including internet software and services—making up 37% of the MSCI China Index, while their market cap representation stands at 32%, far exceeding that of hardware

This structural advantage solidifies China’s pace in AI applications, further facilitating a shift in the global industrial focal point from hardware infrastructure toward software services.

Currently, China holds an irreplaceable position in global manufacturing, with its companies exhibiting a composite advantage characterized by high performance-to-cost ratios and rapid iteration across sectors like semiconductors, new energy vehicles, and advanced equipmentThe boost in productivity driven by AI is set to narrow existing gaps, thereby enhancing the valuation of Chinese tech stocksThe redefinition of competitiveness in Chinese manufacturing hinges not only on breakthroughs in AI technologies but also on the profound integration with the real economyRapid deployment scenarios, open application policies, and a receptive public playing their part have collectively catalyzed the ascendancy of Chinese technological innovationThe world's largest asset management institution, BlackRock, has pointed out that China is leveraging new productivity avenues to transform its economy, with the high-tech manufacturing sector now entering a phase of tangible resultsDeepSeek’s cost-effective model presents a viable path for small and medium-sized enterprises to undergo intelligent transformations, catalyzing a swift adoption of the DeepSeek R1 open-source model by Chinese and even global businessesChina’s penetration into AI applications, including industrial robots and futuristic home robots, has far exceeded the global average, with ongoing optimizations in AI algorithms poised to elevate manufacturing productivity across the boardThis combination of soft and hard advantages allows China to transition from being a cost center within global supply chains to becoming an innovation hub.

Humanoid robots are among the most promising AI applications, with Elon Musk predicting that by 2040, the number of robot productions could outnumber that of humansIt is easy to imagine a future where, 20 to 30 years from now, streets are populated with robots, and many households opt to adopt one or two robots to manage daily chores, potentially integrating them into family life.

In summary, the current spring market is unfolding, with sectors such as humanoid robotics and new energy vehicles beginning to rise due to strengthening policy support

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