Sovereign wealth funds fear missing China tech boom, survey says
Some 59 per cent of respondents see China as a high or a moderate allocation priority over the next five years, up from 44 per cent last year, the survey conducted among 83 sovereign wealth funds and 58 central banks during the first quarter of 2025 showed.
'There's a bit of fear-of-missing-out effect here with China tech boom like Silicon Valley of some years ago,' said Rod Ringrow, head of official institutions at Invesco. 'There's a general view from the sovereign sector here that Chinese tech will be globally competitive and they want to make sure they're part of the programme now.'
Attractive local returns are cited as the top driver for future flows, reflecting confidence in the sector's valuations and earnings potential relative to other markets, the survey said. The shift comes despite rising tensions between China and the US.
It comes at the cost of reduced allocations to longer-maturity US government debt amid concerns about fiscal sustainability and policy volatility, the report said. Sovereign asset managers are also re-evaluating passive index strategies, particularly those focused on exposure to US equities.
Furthermore, central banks are building larger, more diversified reserves to withstand volatility, the report said. While the US dollar retains its dominance, gold's role as a defensive asset is growing.
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'Central banks continue to buy gold and a lot of that is driven by weaponization concerns,' Ringrow said. 'It's a core part of the reserve holdings due to anti-inflation protection but also because it can't be easily sequestered by someone else.'
Sector-focused
Ringrow said the bullish camp on China includes a number of US-based institutions. Still, the renewed interest doesn't mean a return to a broad-based 'rush to China' sentiment of the past, according to Invesco.
Instead, it 'reflects a more deliberate, sector-focused approach, targeting areas where China is positioned to achieve global leadership, underpinned by both market momentum and strategic policy support,' the report said.
This means that sovereign investors are orienting their China strategies around specific tech ecosystems, rather than broad macroeconomic exposure. These include semiconductors, cloud computing, artificial intelligence, electric vehicles and renewable energy infrastructure, according to the report.
Invesco cited a Middle Eastern sovereign wealth fund as saying that China will dominate solar, wind, EV, and battery markets for decades. A respondent from the Asia-Pacific region said that given the amount of resources and policy support from Chinese authorities, it's only a matter of time until the country closes the gap on the US in semiconductors, cloud computing, and AI. BLOOMBERG
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