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China Perspectives - The 15th FYP Strengthens the Case for China’s Technology Sector
Nov 13, 2025
- In the technology space, mounting external uncertainties — particularly amid trade tensions and technology rivalry with the US — have underscored the urgency for China to accelerate innovation and strengthen technological independence. Compared with the 14th Five-year Plan (FYP), the recommendations for the 15th FYP introduced at the Fourth Plenary Session included the new concept of “strengthening original innovation”, further reinforcing China’s determination to achieve breakthroughs in technological development
- More specifically, the 15th FYP’s recommendations position “technological self-reliance and self-strengthening” as a core national strategy, prioritising frontier areas such as AI, integrated circuits (IC), software localisation and digital infrastructure. Through systematic policy support and coordinated resource allocation, China aims to accelerate the formation of new productive forces and steer its economy towards a more domestically driven, innovation-led model. We believe that, beyond China’s leading internet and technology firms, sub-sectors such as AI hardware, software, gaming, and consumer electronics and smart devices offer further upside potential in both earnings growth and valuations, supported by clearer policy tailwinds
- Fundamentals are in favour too. Q3 A-share earnings showed IT sector profits grew by 30.8 per cent year-on-year, trailing only the materials space. Since July 2025, consensus forecasts for 2026 earnings in China’s growth industries have been revised sharply higher. Current estimates suggest that CSI 800 constituent earnings will rise by 10.3 per cent YoY in 2026, led by the IT sector at 31.4 per cent — driven primarily by increasing capex from cloud service providers and the accelerating adoption of AI
- Against a backdrop of ample liquidity and still-reasonable valuations, we remain positive on the technology sector, which continues to embody China’s innovation potential — particularly within policy-supported sub-sectors mentioned above. We employ a barbell strategy that combines technology with value-oriented dividend plays to hedge against potential external uncertainties and downside risk to cyclical data. HSBC’s investment management teams continue to assess how these policy-supported themes can be expressed across diversified client portfolios.