China’s Shanghai Composite Index reclaimed the 4,000-point mark on Thursday for the first time in months, buoyed by investor optimism over Beijing’s latest push for tech self-reliance. The rally comes after a new government directive requiring state-funded data centres to use only domestically produced AI chips, a move widely seen as a decisive step in China’s long-term effort to cut dependence on foreign technology amid ongoing U.S. export restrictions.
At the midday close, the Shanghai Composite (.SSEC) rose 0.9% to 4,004.25, while the blue-chip CSI300 (.CSI300) gained 1.3%. The CSI Semiconductor Index jumped over 4%, driven by strong performances from SMIC (+3.9%) and Cambricon Technologies (+6%).
Why It Matters
The new chip policy underscores China’s strategic urgency to secure technological autonomy, particularly in AI and semiconductor production sectors critical to its economic and national security goals.
By mandating domestic chips in public data centres, Beijing is signaling that state funding will serve as leverage to strengthen local chipmakers and accelerate innovation. Analysts view this as one of China’s most assertive measures yet to reduce reliance on Western suppliers like NVIDIA and AMD, which have faced mounting export curbs.
“Fresh optimism about China’s chip self-sufficiency and upcoming technological breakthroughs would continue to support the entire sector’s performance despite the rich valuation,” said Kenny Ng Lai-yin, strategist at China Everbright Securities International.
Chinese Government: Driving the push for domestic AI chips to enhance digital sovereignty and resilience against foreign sanctions.
Local Tech Firms: Chipmakers such as SMIC and Cambricon stand to gain from increased demand and state-backed projects.
Investors: Viewing the move as a catalyst for long-term growth in the semiconductor and AI industries.
Foreign Chipmakers: Likely to face reduced access to China’s lucrative data centre market as localization policies deepen.
Regional Markets: Hong Kong’s Hang Seng Index rose 1.6%, and the Hang Seng Tech Index advanced over 2%, reflecting broader optimism across Greater China.
Market Reactions
Investor sentiment remained bullish across tech sectors:
The CSI AI sector index and information technology index both gained about 2%.
Cathay Pacific Airways reached a three-month high after announcing plans to buy back Qatar Airways’ remaining stake, signaling corporate confidence in post-pandemic recovery.
Autonomous driving firms Pony AI and WeRide, which debuted in Hong Kong trading, saw initial declines, suggesting a selective investor appetite for new tech listings.
What’s Next
Markets are now awaiting China’s October trade data, due Friday, which will provide clues about the broader economic outlook. Exports are forecast to grow 3% year-on-year, indicating modest recovery in global demand.
Looking ahead, analysts expect Beijing to expand incentives for domestic chip innovation while tightening procurement rules across public infrastructure. If sustained, the policy momentum could reshape global semiconductor supply chains, further entrenching the divide between Western and Chinese tech ecosystems.
With information from Reuters.
