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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.

Unlock the Editor’s Digest for free

Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

The head of Swiss chemicals producer Clariant said the company would expand capacity in China and warned of “more production shifting away from Europe” because of the continent’s higher energy and labour costs.

Chief executive Conrad Keijzer said Clariant was targeting 14 per cent of its sales coming from China by 2027, up from 10 per cent at present, and that the country would account for more than half of global growth for chemicals over the next five years.

The company has expanded two Chinese plants, which Keijzer said would allow Clariant to produce 70 per cent of the chemicals it sells in the country locally, up from about half.

“Most of the growth by and large is coming from China,” Keijzer told the Financial Times this month after opening a SFr180mn ($226mn) expansion to two factories in Huizhou, southern China.

“If we are static on it, then we’re long-term losing out,” he said. “It automatically means more production shifting away from Europe.”

European companies have struggled to compete against Chinese rivals in a range of commodity chemicals, leading to plant closures across the continent. The industry has also been rattled by surging gas prices after Russia’s full-scale invasion of Ukraine and a slowdown in European manufacturing.

Keijzer said Clariant’s China expansion was prompted by higher energy prices in Europe and rapid growth in Chinese demand for chemicals. While barriers to entry such as intellectual property rights have insulated the company’s speciality chemicals business, the move was also driven by rising competition from Chinese producers, he said.

Labour costs were another factor, Keijzer said, citing an annual outlay of €100,000, including tax and other expenses, for an operator at a German plant versus €10,000 in some parts of China.

The Muttenz-based company, which was spun off from Sandoz in the 1990s, produces speciality chemicals for industries ranging from cosmetics to agriculture in 68 plants around the world, nine of them in China. The company previously said it planned to cease production at its final Swiss site in Muttenz next year.

The price of natural gas, the primary fuel source for boilers and crackers used in plants, remains elevated compared with levels before Russia’s full-scale invasion of Ukraine in 2022, Keijzer said.

But he also blamed the EU’s carbon tax, “which was a great idea 10, 15 years ago when we thought the rest of the world would follow” but now made it difficult for producers to compete with global peers.

“The reality of it is that Europe has lost a part of its chemical industry because of the structurally higher gas prices,” Keijzer said.

Europe also exports a significantly larger portion of its chemicals than the US or China, but competing against Chinese companies, which have increased their own production, has become “much more difficult”, he said.

The consultancy Roland Berger in September said China’s “unimaginable” chemicals output could fully meet western demand in certain sectors with surplus.

UK chemicals producer Ineos this week said it was filing 10 anti-dumping cases against cheap imports into the EU, warning that “time is running out” to rescue the European sector.

Ivy Sun, who leads China chemicals research at Roland Berger, said European companies could only compete by localising production or innovating on specialist products, but many had been slow to do so.

“It’s a historical trend that is difficult to [turn back],” she said of the market shifting to China. “I can’t even name one European or US chemicals player who is performing very well on the market.”

Keijzer said any further retreat of chemicals production would have a knock-on effect in other sectors.

“If you have to import all your steel, if you have to import all your plastics, it will be very difficult to make a competitive electric vehicle in Europe,” he said. “This is not always understood by the European Commission.”

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Roula Khalaf, Editor of the FT, selects her favourite stories in this weekly newsletter.

Vinted is discussing a share sale that could value the European second-hand fashion start-up at roughly €8bn in a deal that would underscore the platform’s expansion while allowing some early investors to cash out.

The fast-growing company is in preliminary discussions about selling existing shares in a transaction that could be worth several hundred million euros, according to people familiar with the matter.

Any process would be likely to kick off early next year, they added, while cautioning that talks were still at an early stage and no valuation or size had yet been set.

Lithuania-based Vinted last brought in new investors about a year ago at a €5bn valuation in a deal led by US investment group TPG that also included asset manager Baillie Gifford.

Chief executive Thomas Plantenga said on Friday that revenues were set to rise about 40 per cent to more than €1bn this year, from €813mn in 2024, off sales of items on its platform with a gross merchandise value of €10bn. Net profits roughly quadrupled last year to €76.7mn.

Founded in 2008 as a way for locals to swap clothes, Vinted in 2019 became Lithuania’s first $1bn technology start-up. Its previous backers include Accel, Insight Partners, EQT, Lightspeed and Sprints.

The company is now pushing beyond clothing into categories such as electronics, books, toys and video games as it seeks to capture more of the booming market for used goods. Vinted is also focusing on efficient shipping and payments.

“In the end, our vision is to make second-hand first choice . . . globally, and [for] any type of product you can imagine,” Plantenga told the Financial Times last year. “In the long term, we would try to go to other categories.”

At the time, he also hinted that the group could soon look at expanding into the US after having established itself in most European countries.

The company said on Friday it had started its first test to crack the US market by establishing a connection between London and New York that allows buyers and sellers in each location to trade with each other.

“The US market is very immature,” Plantenga told Bloomberg TV. “All the players that are there are struggling and the penetration levels of second-hand are very low. So for us, that’s a huge opportunity.”

Vinted could eventually pursue an initial public offering, Plantenga has said previously, although it does not have a set timetable.

Vinted declined to comment.