Xi's Meeting Boosts China Tech Stocks

Xi Jinping Meets with Tech Titans: A Signal of Support

In a notable shift from the regulatory clampdown of recent years, Chinese President Xi Jinping convened with key private sector leaders, including Jack Ma of Alibaba and Liang Wenfeng of Deepseek, in a meeting that could herald a new chapter for China's tech industry. This meeting, held on Monday, was not merely symbolic; it was a clear signal from Xi and Premier Li Qiang, who also attended, that the government recognizes the pivotal role of private tech companies in driving economic growth. The official Xinhua News Agency reported Xi addressing the entrepreneurs after hearing their perspectives, though exact participants were kept under wraps.

This engagement comes at a critical juncture when China's GDP growth has slowed down to 5.2% in 2023, according to the National Bureau of Statistics, from a higher average of around 6-7% in the decade prior. The tech sector, once a beacon of this growth, faced significant regulatory hurdles, leading to a dip in innovation and investor confidence. However, recent data shows a rebound; the Hang Seng China Enterprises Index, which includes major Chinese firms listed in Hong Kong, has surged by 27% since January 2025, largely fueled by optimism around AI and tech policy shifts.

The Background of Regulatory Tightening and Its Economic Impact

The backdrop to this meeting is the infamous regulatory crackdown that started in 2020, epitomized by the blocking of Ant Group's IPO, which was poised to be the world's largest at an estimated valuation of nearly $313 billion. This event was followed by a series of measures targeting tech giants like Alibaba and Tencent, focusing on data security, antitrust issues, and financial oversight. The impact was palpable; Alibaba's market value plummeted from a peak of over $850 billion in 2020 to around $230 billion at its lowest point in late 2022, according to data from Bloomberg.

Yet, the economic fallout was broader than individual company fortunes. Innovation indices, like the Global Innovation Index, showed China slipping from 14th in 2020 to 12th in 2023, suggesting that the clampdown might have had a chilling effect on entrepreneurial activities. However, recent developments, including the meeting with Xi, indicate a policy re-alignment. The government's latest five-year plan emphasizes "new productive forces," with AI and tech innovation at the forefront, signaling an intent to reverse the trend.

AI and the Stock Market Rally

The current stock market rally in China, particularly in tech, can be directly linked to AI advancements. Alibaba's AI model, Qwen, has shown competitive performance, contributing to a 60% surge in its stock since January 13, 2025. Similarly, Tencent Holdings Ltd. saw its shares rise by 7.8% on the day of the meeting after announcing AI integration into WeChat. The Hang Seng Tech Index, which tracks tech stocks in Hong Kong, has seen a 40% increase year-to-date as of February 2025, trading at 18.2 times forward earnings compared to 44.9 times four years ago, suggesting that while the market is rallying, valuations are not yet at bubble levels.

However, not all analysts are convinced of the sustainability of this rally. The market's P/E ratio, though lower than before, still indicates some caution with the average P/E for the CSI 300 at about 15.2, which is higher than its historical average of around 12-13. The skepticism partly stems from the fear of policy volatility, but also from global economic uncertainties, including U.S.-China relations under a potentially more aggressive U.S. administration.

Implications for Global Tech Competition

China's renewed focus on tech, underscored by this high-level meeting, could reshape global tech dynamics, especially in AI. With U.S. restrictions on technology exports like semiconductors, China's push for self-sufficiency could fast-track its tech advancements. In 2023, Chinese AI startups raised over $10 billion, a 20% increase from 2022, according to CB Insights, reflecting the sector's growing vibrancy despite international headwinds.

This strategic pivot might also affect international relations and tech alliances. Countries like Russia, looking for alternatives to Western technology, might find China's advancements appealing. However, the balance between state control and innovation freedom remains a delicate one. The global tech community will watch closely to see if China can foster innovation while maintaining stringent oversight, a model that could either inspire or caution other nations.

Market Movements and Future Outlook

Alibaba's stock, after the meeting, has not only rebounded but also surpassed its performance from the beginning of the year, with a market cap now hovering around $320 billion, up from its 2022 lows. Tencent, with its AI initiatives, is also seeing positive market reactions, with its shares up by nearly 40% since January lows.

The broader economic implications include a potential increase in consumer confidence, which was at a low of 87.9 in December 2024, according to the China Beige Book, but has shown signs of recovery with recent market optimism. The rally has also trickled down to sectors beyond tech, with electric vehicle companies like BYD seeing stock increases due to their AI-driven innovations in autonomous driving technology.

However, for these gains to be sustainable, more than symbolic gestures will be needed. Policy clarity, consistent support for R&D, and perhaps a more predictable regulatory environment will be crucial. Furthermore, how China navigates its AI development in the face of global scrutiny and potential tech wars will significantly influence its economic trajectory. If managed with foresight, this could indeed mark a new era where China's tech sector leads not only in innovation but also in setting a global example for state-private sector synergy.

Expanding to Other Chinese Stocks

Beyond the tech giants like Alibaba and Tencent, several other Chinese stocks have also been influenced by these developments. JD.com, one of China's largest e-commerce platforms, has seen its shares increase by around 20% since the start of 2025, leveraging the positive sentiment around tech and consumer spending. JD.com's focus on logistics and supply chain efficiency has made it a key player in the e-commerce space, which is expected to grow with the normalization of the economy post-COVID.

NIO, a significant player in the electric vehicle (EV) market, has also benefited from the AI and tech optimism. Despite a challenging year in 2024 due to market competition and supply chain issues, NIO's stock has risen by about 15% since January 2025, driven by announcements of new models with advanced AI features and partnerships for expanding battery technology.

In the health-care sector, WuXi AppTec, a leading global pharmaceutical, biotechnology, and medical device R&D outsourcing company, has seen its shares climb by around 10%, as it capitalizes on the global need for drug development and the push towards bio-innovation in China. The company's strategic importance has been highlighted by its role in both domestic and international drug development projects.

Bilibili, known for its video-sharing platform and gaming, has also seen its stock value increase by approximately 25% in the early months of 2025. This growth is attributed to its expansion into cloud gaming and AI-driven content personalization, making it a cultural phenomenon among younger demographics in China.

Pinduoduo (now known as PDD Holdings), which has transformed from a group buying platform to a global player, with its international platform Temu, has seen its shares jump by 30%. This surge is partly due to its aggressive expansion into international markets and leveraging AI for better consumer engagement and supply chain management.

​Each of these companies, while not directly mentioned in Xi's meeting, are nonetheless part of the broader ecosystem that benefits from a more supportive regulatory environment. Their performance reflects not just the tech sector's health but also the interconnectedness of various industries in China's economy. The overarching narrative is that China's push towards technological self-sufficiency and innovation is creating opportunities across sectors, potentially leading to a more resilient economic structure capable of competing on a global scale. However, the challenge remains in maintaining this growth trajectory amidst regulatory unpredictability and international trade tensions.