China's underperformance in the tech sector is attributed to several factors, including its lag in the AI battle and strict tech regulations. The country's tech shares are also grappling with a broad sell-off that has wiped out $6.3 trillion in stock-market valuation since 2021. Additionally, China's economy has shown signs of faltering since the end of its zero-COVID lockdown measures in late 2022, with issues such as deflation, sluggish demand, and rising youth unemployment.
Key takeaways:
- US tech stocks have significantly outperformed their Chinese counterparts over the past decade, with the Invesco QQQ ETF, which tracks US tech stocks, climbing 3% this year and 384% since January 2014.
- Chinese tech stocks, on the other hand, have underperformed, with the Invesco's China Technology ETF tumbling 13% in 2024, wiping out its gains from the past decade.
- China's strict approach to tech regulation and its falling behind in the AI battle could be factors contributing to the underperformance of its tech stocks.
- China's tech shares are also contending with a broad sell-off that has wiped out $6.3 trillion in stock-market valuation since 2021, with the Hang Seng index falling 7% this year and Nasdaq-listed Chinese stocks plummeting 29% over the past year.