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Chinese chip stocks show strong growth amid expectations of new stimulus measures
China’s chip stock market saw a significant $13 billion rise, driven by investor speculation that Beijing may announce new stimulus measures to support the strategically important semiconductor sector. This signaled renewed confidence in the world’s second largest economy, which is at the centre of a geopolitical conflict with the United States over technological superiority.
One of the biggest beneficiaries of this growth has been China’s leading semiconductor maker, Semiconductor Manufacturing International Corp. (SMIC), according to Bloomberg. Its shares rose by 28%, reaching their highest level in four years. Since last week, SMIC’s share price has risen by about 65%, adding almost $10.7 billion to the company’s market value. Smaller players in the market, such as Hua Hong Semiconductor Ltd. and Shanghai Fudan Microelectronics Group Co. also contributed to this significant rise, which together increased their value by more than $2 billion.
Market reacts to political and financial expectations
Investors are betting that the Chinese government will continue to increase support for domestic chipmakers to boost economic growth and strengthen its position in the global technology race. These hopes have emerged against the backdrop of general economic support from Beijing, which is trying to address a number of problems associated with the country’s slowdown. At the end of September, the Chinese government announced a series of stimulus measures, including interest rate cuts and a promise to inject $340 billion into the stock market. Investors expect similar measures to be implemented for the semiconductor sector.
Chips are one of the key elements in the development of modern technologies, including artificial intelligence and electric vehicles. They have become a central element of the long-running geopolitical confrontation between the US and China. Washington has been staunchly opposed to the development of the Chinese semiconductor sector, in particular because of concerns about the possible use of technology for military purposes. SMIC has already been blacklisted by the US over allegations of providing assistance to the Chinese army.
Large-scale support from the state
Despite pressure from the US, China continues to invest heavily in the development of its chip industry. According to the Semiconductor Industry Association, the Chinese government plans to spend more than $142 billion to support the sector. This includes a $27 billion fund to invest in leading companies such as SMIC and Huawei Technologies Co.
Beijing and local governments have limited disclosure of the scale of funding for these projects, but it is known that the money comes from state funds, regional government programmes, and tax incentives. This provides significant support to domestic producers seeking to reduce China’s dependence on Western suppliers and strengthen its position in the global tech industry.
Expectations of new incentives from Beijing have become a catalyst for the growth of the Chinese semiconductor market, which puts China at the forefront of the global technology race. Further steps by the government could have a significant impact on the development of the sector, which plays a key role in the country’s geopolitical strategy.
