China’s $420 billion National Social Security Fund is scoping out technology-related investment opportunities in domestic equities, particularly the so-called “AI+” theme that has been gathering market and political momentum.
As a largely domestic investor with 88.5 per cent of its assets invested in China, the fund’s perspective signposts where opportunities are emerging in A-shares. Its push into AI and technology-related stock points to sectors that will benefit from policy support and domestic demand.
“AI+” refers to cases where artificial intelligence is married with traditional industries to enhance profitability, such as “AI + agriculture” where machine learning is used to monitor soil health and pest problems and “AI + manufacturing” where it is used for product quality control on the assembly line.
It was a prominent theme at this year’s Two Sessions – China’s top political gathering – where Premier Li Qiang highlighted AI-enabled electric vehicles, smartphones, computers and robotics as key technology priorities in 2025.
“The ‘AI+’ investment opportunities warrant attention, including how leading internet companies are integrating computing power and algorithms into consumer-end applications, how AI can enhance profitability when combined with China’s strength in traditional light industries such as furniture and toy-making, and those companies in the robotics supply chain that have already secured global orders,” according to a new research paper from the National Council for Social Security Fund (NCSSF) – the agency that manages and invests China’s strategic pension reserve – published in Chinese.
“AI+” is the next iteration of the “internet+” strategy which the central government first backed during the Two Sessions in 2015. It homed in on transforming traditional industries with speedier connection and information exchange, which prompted the rise of e-commerce giants, mobile payment systems, ridesharing platforms, delivery services and travelling apps.
Aside from traditional industries, the paper – authored by Li Na in the fund’s asset allocation and research department – flagged that Chinese tech giants have the potential to amplify their strengths in AI applications this year, supported by the rapid rise of domestically developed algorithms.
It is a welcome shift from what the fund observed in 2024 when, aside from a handful of outperforming companies and short-term thematic trades, the AI sector in China’s A-share market offered little broad-based beta opportunities.
The investor is paying close attention to technology stocks because of the resilience they showed during risk-off periods. Supporting this thesis, the NCSSF’s research examined two case studies of the US and Japan, focusing on periods when their respective 10-year government bond yields fell by 100 basis points from 2 to 1 per cent.
Broadly, it took 8.5 years (2011-2020) for US Treasury yields to fall from 2 to 1 per cent before recovering an upward trend, and 14.5 years (1997-2010) for Japanese government bonds, the research said.
It tallied the performance of different asset classes during these two stretches and found one commonality between the US and Japan: the technology sector (S&P 500 Information Technology and TOPIX Precision Instruments) posted strong gains relative to the broader equity markets.
“Defensive sectors such as utilities and food also performed well. The main divergence appeared in financials: Japanese financial stocks dropped sharply, while US financials advanced,” Li wrote, concluding that during period of falling yield the technology sector still provides ample investment opportunities.
Aside from China A-shares, Li also recommended looking out for any corrections in US tech companies which could be attractive entry points.
“In 2024, the US equity market has been characterised by a combination of high returns, low volatility, and elevated valuations. Continuous capital expenditures by technology companies supported earnings growth for leading computing power providers, while AI firms such as Palantir translated enterprise-focused AI applications into tangible performance,” Li wrote.
“[In 2025], AI-driven applications that lower costs and improve efficiency, as well as services and products with large market potential – such as autonomous taxi services – warrant close attention.”
The research also recommended increasing allocation in foreign bonds which has become attractive due to the low-interest rate environment in China.
Since NCSSF was established in 2000, its annualised rate of return was 7.36 per cent as at December 2023. It has 14 departments managing 31.2 per cent of the investment in-house and 68.8 per cent via external mandates.
It invests in a list of asset classes approved by the State Council of China, including domestic and foreign equity, bonds, bank deposits, investment funds and foreign derivatives.
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