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Foreign purchases of Chinese equities have hit their highest level in four years, in a sign global investors are reassessing a market that until recently was considered “uninvestable”.

Offshore inflows into China stocks from January to October this year totalled $50.6bn, up from $11.4bn in 2024, according to data from the Institute of International Finance, a trade body for the global banking industry.

Chinese stocks listed on the mainland and in Hong Kong have risen strongly this year, driven by enthusiasm for artificial intelligence following the release of DeepSeek’s groundbreaking model and a strong run of listings in Asia’s financial hub.

The gains follow years of dismal returns, as foreigners sold down their positions in response to mounting concerns over slowing economic growth and rising tensions between Washington and Beijing.

“China still trades at a record discount to the rest of the world and yet they have some of the best companies in the tech space,” Jonathan Pines, head of Asia ex-Japan equity at Federated Hermes. “They’re the only realistic competitor to the US in some spaces.”

This year’s foreign buying remains below the record full-year figure of $73.6bn reached in 2021, when China’s CSI 300 rebounded strongly from the initial shock of the coronavirus pandemic to hit an all-time high. However, it still marks a reversal after several years of falling investment from foreigners.

“Two years ago China was uninvestable for a lot of people,” said Yan Wang, chief emerging markets and China strategist at Alpine Macro.

Beijing stopped releasing daily data tracking investment in equities in mainland China via Hong Kong last year, making it harder to gauge levels of foreign flows. The IIF tracks changes in external portfolio liabilities and excludes Chinese companies listed in the US.

There has been more buying of Chinese equities since the US unleashed its “liberation day” tariffs in April, according to Citi, with roughly 55 per cent buying versus 45 per cent selling across different client types.

This year, foreign active managers have been net sellers of Chinese equities but that has been more than offset by inflows into passive funds, according to EPFR Global data tracking flows into exchange traded funds and mutual funds.

The strong performance of Chinese stocks this year has primarily been driven by a rush of domestic money from retail investors, said Stuart Rumble, head of investment directing for the Asia Pacific at Fidelity International.

Mainland China investors have poured HK$1.3tn (US$168.7bn) into Hong Kong’s stock market this year, a record high, and now account for about 20 per cent of turnover on the exchange.

Foreigners’ caution on Chinese equities followed a property downturn, a crackdown on private business and an escalating US-China trade war, which together helped push the stock market down by nearly a half from its peak.

“There was a point where people just didn’t want to talk about [China],” said Daniel Morris, chief market strategist at BNP Paribas Asset Management. “Now we do talk quite a bit.”

Beijing’s crackdown on private business, exemplified by Alibaba founder Jack Ma’s fall from grace, is widely seen to have damaged confidence in the country. Regulators have since pushed a string of reforms designed to revive markets.

“It was clear they wanted their capital markets to go up,” said Pines.

This year’s uptick in equity inflows from foreign investors comes as many state pension funds in the US such as Texas and Indiana have divested from Chinese companies as a result of volatile US-China relations.

Some investors are keen to gain exposure to innovative Chinese technology companies, in part as a way to diversify out of US markets trading near record highs. Stocks such as Alibaba remain off their peak valuations and trade at discounts to US counterparts.

“You don’t want to put 100 per cent of your portfolio in Nasdaq,” said Morris.