As one of our more seasoned brokers used to say, “China is a big country”. While this statement has stood the test of time, it increasingly captures a profound duality: the scale that has long been a source of structural cost advantage is proving to be more of a contemporary headwind fuelled by over investment and excess supply.

This scale became immediately apparent before even arriving in the far east, as the Hong Kong-Macau-Zuhai bridge stretches out into the distance on the approach to Hong Kong International airport. On more than one occasion, we hear that “enough steel to build 60 Eiffel Towers” is contained within the world’s longest bridge-tunnel sea crossing. It is as good a representation as any of the increasing integration into the Greater Bay Area under the ‘One Country, Two Systems’ framework. It may also represent China’s continued dependence on state-driven investment to drive economic growth, which is the underlying cause for the deflation that has been stubbornly persistent in the last few years.

Despite this deflationary background, the stock market had a very strong year in 2025, up 28% in USD terms and over 70% since its low on 22nd January 2024. Mirroring the U.S., this strong market performance was primarily driven by the tech sector and internet consumer stocks. The release of DeepSeek’s open-source AI model in January ignited the market in 2025 as investors realised that China is not far behind the U.S. in terms of AI capability and has a significant cost advantage due to lower energy prices.

China’s many temples are an important part of its Buddhist heritage and culture.

Shenzhen/Guangzhou

Shenzhen is our first port of call. A first-tier city home to approximately 18 million people, Shenzhen is often referenced as China’s answer to Silicon Valley. The technological focus and entrepreneurial energy within the city is evident in several ways but perhaps most notably the scale of electric vehicle (“EV”) infrastructure. It came as little surprise to learn that Shenzhen has the highest density of public charging stations per million inhabitants in the world.

We are told on several occasions throughout the trip that the city continues to attract a growing number of Hong Kong residents for evening and weekend leisure purposes, as a place where goods and services can often be found at better than half price discounts.

Our company meetings here span the Guangdong province, covering the cities of Shenzhen, Foshan, and Guangzhou, and the Household Appliances, Renewable Energy and Health Care sectors, among others. The hot topic of robotics quickly emerges as a common theme across multiple meetings.

The entrepreneurial spirit of the province is clear, underpinned by a very pro-business, low tax local government that was the first to implement market-based reforms in the early 1990s after Deng Xiaoping’s “Southern Tour” in 1992. Companies here have been quick to respond to central government targets in new industries such as EVs, robotics, and batteries, and many of the China global champions come from the region. The ability to execute quickly has meant that global companies have been able to adapt quickly to tariffs, raising labour costs by rapidly moving production abroad and increasing automation in their plants globally using their own robot technology. The same entrepreneurialism and adaptability that once turned coastal villages into the world’s factory floor is today taking this knowhow overseas.

For centuries, China’s colourful red lanterns have inspired artists, historians, travelers, and locals.

Beijing

Next up is the Chinese capital, Beijing. The look and feel of the city couldn’t be more different to Shenzhen, and with its political and military power clearly on display, it is more reminiscent of Old China. The scale is still huge but dominated by low rise concrete buildings rather than the glass and steel skyscrapers of the south. We meet four companies in the city, spanning industries that include Luxury Goods, Communications Equipment, Real Estate, and IT. Global growth is a common thread among most of the management teams we speak to, underscoring a wider feeling that China’s growth ambitions are about restoring the country to previous high levels and reasserting its historical place in the world. The economic prowess of multiple Chinese dynasties over the last 2,500 years has not been forgotten on the mainland, something that we were reminded of at our next destination.

In the investment arena this is manifesting itself in the emergence of domestic Chinese heritage brands such as certain luxury jewellery brands. Their rising popularity among the affluent younger generation demonstrates that high-end domestic brands continue to take market share from the multi-nationals. Luxury consumption has been relatively resilient amidst overall low sentiment post Covid.

Indeed, weak consumer sentiment was a consistent theme throughout our trip, with the fall in property values being blamed as the main factor behind this. We met China’s leading property listing platform and estate agent to get an update on the market. After 2024’s central government stimulus package, property values and transaction volumes seemed to be stabilising into the end of the year, however both values and volumes continued to slide in 2025. Given that most of middle-class wealth is stored in property, we really need the housing market to stabilize in order for consumer sentiment to sustainably improve.

On a more optimistic note, we also met a Chinese tech giant whose products span air conditioners, smart phones, and more recently EVs. We were able to take a test drive in the company’s new SUV, which has electrified the market since its launch earlier this year.

Starting from the equivalent of USD35,000, the vehicle’s quality, performance, and autonomous features are compelling, underlying China’s leadership in EVs globally.

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