China Technology: The $2tn Tailwind

What Is It All About?

The Atonra China Technology strategy offers targeted exposure to China's innovation ecosystem through a 35-stock portfolio that replicates a proprietary index of over 1,000 technology companies. The investable universe is structured around four pillars:

1. Semiconductors: Equipment and fabrication benefiting from localization imperatives and state-directed capital.
2. AI & Software: Enterprise platforms and vertical applications riding the mandated 90% AI adoption rate in strategic sectors by 2030.
3. Advanced Manufacturing: Robotics, EVs, and clean energy companies at the intersection of policy support and global competitiveness.
4. MedTech: Innovative healthcare technology capturing the import substitution wave.

Unlike standard indexes that concentrate on mega-cap internet platforms, our selection leverages a proprietary classification framework to ensure high purity in the Chinese technology theme, filtering out businesses only marginally linked to the sector while capturing innovation across semiconductors, AI, advanced manufacturing, and MedTech.

From this 1,083-stock universe, our model builds a 35-stock portfolio that replicates the index while optimizing liquidity and costs. Rebalanced quarterly, it keeps us consistently aligned with where China’s technological momentum is strongest.

A Look In The Rearview Mirror

As of early December 2025, our strategy has returned +42% since inception on February 4, 2025. It is outperforming both the underlying index (+37%) and the peers' average (+25%).

The ~17 percentage point gap versus peers reflects the added value of our underlying universe construction: broader coverage, mid-cap tilt, and pure A/H-share (no ADRs) exposure, capturing where policy capital is flowing.

Our portfolio also tends to outperform its underlying 1,083-stock index, demonstrating that our machine-learning-based replication methodology accurately captures the correct exposures while adding value through optimized positions.

The Macro Case For 2026

China Tech's 2tn$ Implementation Phase

2025 was about policy formulation. 2026 is about execution. The 15th Five-Year Plan (2026-2030) commits ~$2tn in cumulative tech spending: ~$100bn annually in R&D, ~$300bn in digital infrastructure, and ~$30bn in provincial tech programs. Formal ratification at the National People's Congress in March 2026 should confirm allocations and provide a near-term catalyst.

Key advances to watch in 2026:

• Robotics ecosystem maturation: China's domestic robotics supply chain is rapidly closing gaps with global leaders. Vertically integrated players are emerging with cost advantages that are reshaping global competition.
• AI infrastructure buildout: Continued deployment of domestically-produced chips and cloud capacity despite export restrictions.
• Advanced manufacturing: Automation penetration is accelerating across EV, battery, and semiconductor fabs.

The 2021-2024 crackdown is definitely over. Big Tech now operates under clear rules: 30% of R&D must support national priorities, open APIs must be used, and 70% of procurement must be domestic.This ~$2tn in cumulative spending flows directly into the sectors our index captures. 

Also, the stimulus room remains ample. Unlike the US, where fiscal expansion risks inflation acceleration, China's subdued CPI/PPI environment provides space for continued monetary and fiscal support. The debt swap program has already freed resources; more can follow if needed.

Valuation And Positioning

As we recently highlighted, the valuation gap remains extreme: ~19 times P/E with ~34% growth (0.56 times PEG) versus US tech at ~38 times P/E with ~16% growth (2.4 times PEG). Historical precedent from Korea (1998) and Taiwan (2001) suggests gaps this wide close within 18 months.

Foreign ownership stands at just 3.7%, compared to 8.2% at the 2015 peak. The national team holds ~3% of the A-share free float (compared to more than 6% in 2015), with mid-caps being the logical next target for deployment. A normalization of either domestic or foreign positioning would provide significant support.

What Could Go Wrong

The risks are real but identifiable. A sharp yuan devaluation would boost local equities but would incur high costs in dollar terms, eroding confidence. The US-China export control truce is set to expire in late 2026, coinciding with the US midterm elections, which may intensify anti-China rhetoric, making it a pivotal event that requires close monitoring. And if domestic demand fails to offset external pressures, the ~5% GDP growth target comes under strain along with corporate earnings.

Our Takeaway

The 15th Five-Year Plan creates a $2tn spending mandate that will flow into semiconductors, AI, and digital infrastructure. The governance structure guarantees implementation. The valuation setup provides a margin of safety. Foreign positioning remains structurally underweight.

We launched at $100 on February 4, 2025. We're at $142 today. The macro setup for 2026 suggests the journey has only just started. Our product, by construction, offers reduced company-specific risk compared to other trackers. The biggest risk is not being invested.