Sovereign funds have poured billions of dollars into mainland China and Hong Kong, reversing a sharp decline in investment with Middle Eastern investors leading the way.
Investments in mainland China and Hong Kong surged to $14.2 billion in the first nine months of 2026, a 190% jump compared to fund investments in all of 2025, according to data provided to CNBC by Singapore-based consultancy Global SWF.
This is in stark contrast to the 54% year-on-year decline in 2025, as geopolitical tensions and concerns about China’s economic outlook weighed on investor sentiment.
According to Global SWF data, this year’s investment resumption is mainly led by Middle Eastern sovereign wealth investors, with Saudi Arabia’s Public Investment Fund alone accounting for $6 billion of inflows, followed by Abu Dhabi Investment Authority’s $2.5 billion.
Abu Dhabi’s Mubadala and Qatar Investment Authority invested $800 million and $600 million, respectively.
Together, the four Gulf funds accounted for almost 70% of government investment in China and Hong Kong over the same period, highlighting the growing role of Middle Eastern capital in the region.
The renewed interest in China comes as sovereign investors increasingly look beyond geopolitical tensions to take advantage of China’s technology, biotech, consumer business and advanced manufacturing opportunities.
“I think China has gone from ‘China is not investable’ to ‘Is China investable?’ To this day, the most common question I get is, ‘Are we missing out?'” said Jenny Li, senior managing partner at investment management firm Granite Asia.
Li said China’s established strengths in manufacturing and biotechnology could give it an advantage as AI development increasingly expands beyond frontier models and into industry-specific applications such as robotics and drug discovery.
China’s extensive network of factories and laboratories provides access to real-world data that could become increasingly valuable in the development of these applications, he added.
attract interest
For Abu Dhabi’s Mubadala, Asia overall is an increasingly important destination as sovereign investors seek to diversify their portfolios and deepen their exposure to long-term growth opportunities.
Andrew Wang, head of private equity and consumer at Mubadala, said the firm believes there are attractive opportunities in China as the fund continues to expand its presence in Asia, citing attractive valuations and China’s vast consumer market.
“Valuations are lower than they have been in recent years. I think it’s going to be a very good vintage for Chinese investors,” Wang told CNBC. He said China is the fund’s top priority for consumer investments in Asia, pointing to the potential for increased household consumption and the growing competitiveness of Chinese brands.
Wang said Chinese companies are increasingly moving beyond their reputation for producing cheap products to higher-value products, as domestic brands demonstrate strong innovation and competitiveness globally. In September, Mubadala announced a minority stake in China’s Luckin Coffee as part of a roughly $1 billion deal with Centurium Capital.
From caution to confidence?
Other major funds are also showing interest this year.
Qatar Investment Authority and Norway’s sovereign wealth fund participated in Alibaba’s $10.2 billion stock offering in August, while Singapore’s Temasek has identified opportunities in China, particularly in biotech, domestic consumer brands and AI-related hardware.
“China remains interesting,” Temasek Chief Investment Officer Rohit Sipahimalani said at the recent Milken Summit in Singapore.
“Biotech in particular is a very exciting area that we’re investing in. Local consumer brands can be really important,” he said.
Sipahimalani also pointed to China’s growing competitiveness across the AI hardware supply chain and predicted that Chinese manufacturers could increasingly challenge existing global players.
Temasek was one of the core investors in optical components maker Zhongji Innolight’s multibillion-dollar initial public offering (IPO) in July.
Pandu Shahril, chief investment officer at Indonesia’s sovereign wealth fund Danantara, told CNBC that the fund is seeing growing interest in artificial intelligence, robotics, healthcare and energy efficiency, and is also considering expanding cooperation with China beyond existing partnerships in nickel processing and battery manufacturing.
Indonesian sovereign investors see opportunities to leverage energy resources to develop AI-related digital infrastructure and downstream industries.
“Currently, we already have someone to lead North Asia on our behalf. She is also based in China, and her job as a team is to “how do we build long-term partnerships, especially on the downstream side,” he said.
Despite the rapid recovery, China remains a relatively small source of sovereign wealth fund flows compared to Western markets.
In the first nine months of 2026, the US attracted $132.4 billion in government investment, compared to $44.6 billion in Europe and the UK, according to GlobalSWF data. China and Hong Kong’s $14.2 billion is just a small portion of these flows.
