China tech opportunities are far from over

China innovation can be broken down into two parts. Firstly, China is now a leader in many of the world’s most strategically important and technologically advanced industries. According to the Washington-based Information Technology and Innovation Foundation (ITIF), China dominates in seven out of the top ten such industries.

Fig 1: Hamilton Index industry leaders, 2020

Source: ITIF Hamilton Index report, 2023

Secondly, China is fast catching up to the US’s pole position in IT and Information Services. To displace the US, China must cross two major hurdles. It must shift from being an efficient copier to a new-to-the-world innovator and to do this, it must become self-sufficient in the semiconductor supply chain.

Hopes were raised this year that China may soon overcome these hurdles. In January, DeepSeek put China’s generative AI capabilities on the world map. More recently, Alibaba, tech startup Cambricon and Hwawei made headlines for their breakthroughs in AI chips, sparking a rally in Chinese tech stocks.

China seems to be on the cusp of a new chapter in its innovation journey and the opportunities open to China companies look far from over.

Two distinct China innovation funds

For those seeking to invest in these potential opportunities, UOB Asset Management (UOBAM) offers two fund solutions which cater to different objectives and risk appetites.

• The United China A-Shares Innovation Fund focuses on Chinese A-share companies at the forefront of China’s tech and innovation
• The United Greater China Fund focuses on stocks across China, Hong Kong and Taiwan that offer good growth potential

To choose the fund that’s right for you, here are some key considerations:

1. Do you prefer to be China-centric or more diversified?

Source: UOBAM

The United China A-Shares Innovation Fund focuses on innovative companies listed on China’s A-shares market. The fund manager currently targets stocks from industries poised to benefit from China’s push for innovation-led growth and technological self-reliance.

The United Greater China Fund offers a more diversified approach by investing in stocks from China, Taiwan and Hong Kong (52 percent, 32 percent and 10 percent respectively as of 29 Aug 2025). To do this, the fund employs a unique AI-augmentation strategy. An AI model is used to screen and shortlist from over 5,000 stocks available within the Greater China region. The fund’s analysts then apply rigorous quality and risk filters to select stocks with good potential to include in the portfolio.

2. Do you prefer to have a tech-focused or more diversified sector exposure?

Source: UOBAM, Factset as of 29 August 2025

With a concentrated portfolio of just 30 stock holdings, the United China A-Shares Innovation Fund represents a high-conviction view on China’s long-term tech opportunities. As such the fund has a dominant allocation to Info Tech (59.5 percent, as of 29 Aug 2025). This positioning aligns with its focus on the strategic themes of AI supply chain (including semiconductors and optical transceivers), green energy, and advanced manufacturing. However, the fund also maintains a small exposure to other sectors as a defensive allocation, providing a counterbalance to the higher-growth, higher-volatility nature of Info Tech stocks.

Meanwhile, the United Greater China Fund has a more diversified sector allocation. Compared to the United China A-Shares Innovation Fund, this fund has a smaller allocation to Info Tech (37.1 percent as of 29 Aug 2025) and more substantial exposure to Financials, Consumer Discretionary and Communication Services. Such a diversified approach can help mitigate tech sector risks while capturing opportunities from a wider range of economic drivers, including new domestic consumption themes.

3. Do you want higher exposure to SMEs?

Source: UOBAM, Factset as of 29 August 2025

The United China A-Shares Innovation Fund targets industry leaders within China’s domestic innovation ecosystem. The fund manager selects companies of all sizes whose technological capabilities are difficult to replicate, positioning them for sustained growth. The fund’s top five holdings (as of 29 Aug 2025) are:

• Eoptolink Technology: A leading provider of high-speed optical transceivers, supporting data transmission in AI infrastructure
• Cambricon Technologies: Up-and-coming AI chip manufacturer which has attracted strong investor interest after it reported a more than 4,000 percent year-over-year revenue jump for the first half of 2025
• Zhongji Innolight: Specialises in optical modules, serving global cloud service providers and telecom operators
• Verisilicon Microelectronics: Offers customisable semiconductor IP and design services
• Foxconn Industrial Internet Co.: A subsidiary of Foxconn, focusing on smart manufacturing and industrial IoT solutions

The United Greater China Fund holds well-established, large-cap names including Chinese companies registered on the Hong Kong exchange (H-shares) and Taiwanese multinationals. Notably, its top three holdings of TSMC, Tencent and Alibaba make up 36.5 percent of the fund. At the same time, the fund holds emerging AI chip maker Cambricon Technologies and other mid-sized domestic companies. The mix of established market leaders and breakout contenders offers investors both stability and upside potential. The fund’s top five holdings (as of 29 Aug 2025) are:

• TSMC: Global leader in advanced chip manufacturing
• Tencent Holdings: Leading internet company with operations spanning social media, gaming, cloud services and digital payments
• Alibaba Group: One of China’s largest tech companies focusing on e-commerce, cloud computing, AI, financial services, and logistics
• Cambricon Technologies: AI chip maker that is also held by the United China A-Shares Innovation Fund
• Hong Kong Exchanges & Clearing: Hong Kong’s stock exchange platform

4. Are you seeking strong short-term gains or a steadier performance?

Source: Morningstar, as of 29 August 2025. Fund performance is calculated on a NAV to NAV basis. Past performance is not necessarily indicative of future performance. Does not include the effect of the current subscription fee that is charged, which an investor might or might not pay.

The United China A-shares Innovation Fund delivered an impressive one-month gain of 32.0 percent in August, taking its year-to-date return to 55.2 percent. This comes amid a sharp rebound in China’s A-share market, particularly in the AI and semiconductor sectors. Over a three-year period however, the fund has posted a negative return of 7.4 percent with a maximum drawdown, i.e. a peak-to-trough decline, of 54.2 percent. This volatility is reflected by its three-year standard deviation of 31.2 percent.

The United Greater China Fund may not have matched its peer over the last one month and YTD, but has delivered a good positive return over the past three years at much lower risk. The fund’s three-year standard deviation of 18.1 percent and maximum drawdown of 19.6 percent is significantly lower than that of the United China A-Shares Innovation Fund.

Portfolio options

Investors can of course choose to include both funds in their portfolio. The United Greater China Fund is well suited as a core investment within a globally diversified portfolio, while the United China A-Shares Innovation Fund can fit into a portfolio’s tactical sleeve by offering exposure to short and long term China innovation themes.