Xin-Yao Ng, Co-Manager of Aberdeen Asia Focus plc highlights some of the ways in which China’s strength in technology is making its presence felt -despite being often overlooked by investors.
It’s now just over a year since the launch of DeepSeek, the Chinese chatbot that proved the global battle for supremacy in artificial intelligence isn’t a one-horse race. With a trillion dollars promptly wiped off the US stock market, even Donald Trump conceded it was “a wake-up call” for the West’s technology titans1.
It may be tempting to believe the US has reasserted its tech pre-eminence since then. Look, for instance, at Nvidia’s staggering market capitalisation of $5 trillion – however stretched that figure might be – and you could reasonably infer that American companies must retain a clear edge.
Yet this isn’t necessarily so. Away from the mainstream headlines, there’s mounting evidence that China isn’t just catching up but has actually already surpassed its fierce rival in an array of tech-related arenas.
Take a recent study by the Australian Strategic Policy Institute (ASPI). It concluded that China now leads the way in research into 66 out of 74 critical technologies, with the US still at the forefront of the remaining eight.
Of particular note is China’s advantage in eight of the 10 technologies most recently added to ASPI’s list. These include generative AI, cloud computing and brain-computer interfaces.
“The historical data for these new technologies tells a familiar story,” ASPI reported. “An early and often overwhelming US lead in research output in the opening decade of this millennium [has been] eroded and then outmatched by persistent long-term Chinese investment in fundamental research.”2
Much more than a fast follower
Of course, cynics might point out that China is home to well over 3,000 colleges and universities and is therefore bound to score impressively in this respect. They might also protest that research doesn’t always translate into real-life impacts.
Yet China is already the top exporter of electric vehicles (EVs). It’s the number-one manufacturer of batteries for both EVs and energy storage. Although its fondness for fossil fuels endures, it’s at the vanguard of sustainable energy.
It’s also fast carving out a reputation as the dominant force in “legacy chips”, which are the semiconductors typically used in products ranging from cars to household appliances. And let’s not forget what DeepSeek told us about the ongoing AI tussle between the world’s two most powerful economies.
By any standard, then, China is no longer just a “fast follower”. Nor is it a nation that continues to discourage entrepreneurship. It’s not even a country where research-driven breakthroughs rarely escape the confines of academia’s ivory towers. Instead, without doubt, it’s a genuine innovator and a major tech player.
It’s perhaps worth remarking at this point that China’s trade surplus for 2025 exceeded $1 trillion – roughly equivalent to the sort of balances the US recorded during World War Two. This feat was in large part achieved on the strength of tech competitiveness3.
So what does all this mean for investors? Not least with diversification in mind, it means investing in cutting-edge tech can be about much more than AI, the US and the mega-cap businesses that customarily lay claim to the lion’s share of column inches and indices alike.
From US mega-caps to China’s long-term growth stories
Reflecting Beijing’s renewed enthusiasm for smaller companies with capacity for significant growth, many of China’s brightest investment opportunities in the broader tech sphere are to be found at the lower end of the market-cap spectrum. This is where a fund like ours aims to unearth hidden gems.
Kingdee, a specialist in enterprise resource planning (ERP) software, is a good example. With Chinese businesses shunning Western ERP suppliers, it has been expanding at an impressive rate.
We also see plenty of promise in Hesai, which produces the lasers needed to facilitate autonomous driving. It has very few rivals at present – not just in China but elsewhere – which suggests it could become an increasingly compelling growth story over the longer term.
Another of our holdings, Precision Tsugami, was once known only as a maker of precision tools. It’s now developing its international client base by dedicating more resources to the field of robotics.
Most investors are unlikely to have heard of companies like these. They’re not businesses whose names consistently feature in the prevailing tech narrative or whose quarterly earnings calls are more anxiously awaited than the outcome of a US Federal Reserve meeting.
They can, though, play a major role in bringing balance and performance to a portfolio – irrespective of whether it’s overtly focused on artificial intelligence in particular or tech as a whole. As investors struggle to look beyond the obvious in the age of AI, this, too, could be a wake-up call.
Xin-Yao Ng is Co-Manager of Aberdeen Asia Focus plc.
[1] See, for example, BBC News: “DeepSeek: the Chinese AI app that has the world talking”, January 27 2025 – https://www.bbc.co.uk/news/articles/c5yv5976z9po.
[2] See, for example, ASPI: “ASPI’s Critical Technology Tracker: 2025 updates and 10 new technologies”, December 1 2025 – https://www.aspistrategist.org.au/aspis-critical-technology-tracker-2025-updates-and-10-new-technologies/.
[3] See, for example, The Week: “How will China’s $1 trillion trade surplus change the world economy?”, December 10 2025 – https://theweek.com/business/economy/china-trillion-trade-surplus-world-economy.
