China’s Next Chapter: Investing in Industrial Innovators

Key Takeaways:

• China’s innovation story has shifted from consumer internet platforms to industrial and technology infrastructure.
• The ChiNext Index provides concentrated exposure to predominantly private-sector companies in advanced manufacturing, AI hardware, EV supply chains and clean energy.
• ChiNext’s differentiated sector composition has historically led to competitive performance and lower correlation versus broader China equity benchmarks.

When investors seek exposure to innovative companies in China, they typically gravitate towards consumer internet names such as Alibaba, Tencent and e-commerce companies included in broad beta China indexes. We believe these companies represent an earlier phase of China’s innovation, and investors may be overlooking the firms powering the next phase of China’s technological leadership. The ‘new’ China narrative centers on domestic industrial production, advanced manufacturing, AI hardware, datacenter infrastructure, EV supply chains, automation and medical technology. These rapidly growing industries benefit from direct policy support from Beijing and are tapping onshore capital markets that reward innovation.

The World Economic Forum has dubbed China’s new strategic ambition “Made in China 2.0,”¹ an AI-augmented, green-energy-powered, self-reliance-oriented transformation of the world’s most formidable industrial base. The Chinese government is actively supporting private enterprises to develop domestic manufacturing prowess in strategic sectors like solar energy, electric vehicles (EVs), humanoid robots, enterprise-grade AI systems and semiconductors. It is providing state funding, tax incentives and targeted programs such as the “Private Economy Promotion Law” to foster self-reliance in cutting-edge technology.²ChiNext is comprised of these market driven, predominantly private sector companies benefiting from both market dynamics and government policy support.

What Is the ChiNext Market?

The ChiNext board, operated by the Shenzhen Stock Exchange, serves as China’s flagship platform for innovative and predominantly privately owned enterprises. It represents a distinct segment of the A-share universe that is designed specifically to support fast growing companies operating in strategic emerging industries. The ChiNext board lists companies that are building advanced manufacturing systems, clean energy technologies, medical devices, AI hardware, enterprise software and automation platforms among other forward-looking industries.

Unlike traditional main board listings dominated by state-owned banks, insurers and energy conglomerates, ChiNext provides targeted exposure to predominantly private-sector companies focused on technological advancement. This structural orientation differentiates ChiNext companies from both the companies listed on the state-heavy Shanghai main board and the consumer internet-oriented companies listed in Hong Kong or the United States.

ChiNext’s Sector Exposure: Industrials and Technology

One of the defining characteristics of the ChiNext Index³ is its sector composition that maintains a pronounced allocation to information technology and industrials sectors. This exposure underscores the Index’s focus on engineering-intensive industries such as hardware technology, advanced electronics, automation systems and renewable energy equipment. The Index maintains meaningful exposure to businesses supplying critical hardware for global data center expansion, and to leading battery and inverter manufacturers.

China's Innovation Economy: Concentrated Where It Counts

ChiNext's exposure to high-growth hardware and electronics sectors dwarfs every major China benchmark

Source: FactSet. Data as of 2/28/2026. Past performance is no guarantee of future results.

This exposure stands in marked contrast to broader China indexes, which allocate significantly to financials, communication services and consumer discretionary sectors. Broad China indexes lean heavily towards state-owned enterprises, while offshore internet-heavy indexes are typically dominated by consumer internet-based business companies. In contrast, the ChiNext Index offers a differentiated exposure to China’s emerging industrial leaders poised to drive the country’s next phase of growth.

Innovation Leaders Powering the Next Decade

The largest constituents within ChiNext Index are companies that operate as global leaders in specialized industries. These include electric vehicle battery manufacturers that supply critical components to multinational automakers, producers of solar inverters and renewable energy equipment used in utility-scale installations worldwide, and manufacturers of high-speed optical components essential for hyperscale data centers and AI servers.

Source: VanEck.
Portfolio Weights as of 2/28/2026. Fund and index holdings are subject to change. Not intended as a recommendation to buy or sell any names referenced. Visit vaneck.com/cnxt for complete holdings data.

These companies provide critical inputs that are essential to AI computing infrastructure, renewable energy systems, advanced manufacturing processes and medical technology development. Their earnings tend to be less sensitive to consumer demand-driven shocks as they are often tied to capital expenditure cycles and structural growth trends.

Performance and Diversification Benefits

The ChiNext Index’s structural orientation has translated into competitive performance across multiple time horizons. It has outperformed a broad range of China equity benchmarks over trailing one, three and five-year periods. This outperformance is driven by the Index’s concentration in companies benefiting from AI infrastructure buildouts, electrification trends and industrial upgrading as opposed to legacy consumer internet-based businesses present in most China indexes.

Outperforming Across 1, 3, and 5 Years

ChiNext has delivered stronger returns than a broad field of China indexes over the last five years

Source: Morningstar. Data as of 2/28/2026. Index performance is not illustrative of fund performance. It is not possible to invest directly in an index. Past performance is no guarantee of future results.

Its differentiated exposure has also resulted in a return profile that does not move in lockstep with global equity benchmarks. Historically, ChiNext has exhibited lower correlation to major global indexes than many other China equity benchmarks, providing an additional layer of diversification within global portfolios.⁴

Positioning for China’s Next Phase

China’s innovation story has broadened and is no longer defined solely by offshore consumer internet platforms. China’s next economic chapter will be written by domestic industrial champions building the physical infrastructure that supports AI, electrification and advanced manufacturing.

Companies participating in China’s transition toward technological self-reliance and industrial modernization are likely to benefit from these structural trends. Investors whose China allocations continue to track legacy benchmarks dominated by mega-cap internet and financial companies may benefit from gaining exposure to the ChiNext Index.

With minimal overlap with traditional China benchmarks, the ChiNext Index offers a differentiated exposure and a distinct return profile geared towards China’s future innovators. The VanEck ChiNext ETF offers access to innovative companies in China and may appeal to investors seeking growth or technology exposure in emerging markets.