China’s internet companies stand to benefit from a number of potential tailwinds this year. Ongoing regulatory support and AI innovation could carry China internet tech stocks higher this year. The KraneShares CSI China Internet ETF (KWEB ) is well positioned to capture gains, up almost 20% YTD.
Regulatory support for the private sector appears to be an ongoing priority for China’s government. President Xi met with the country’s largest tech CEOs and other major entrepreneurs and CEOs this week from the private sector, reported WSJ. The CEOs of Huawei, Alibaba, Tencent, BYD, and more were all in attendance to talk growth for the sector.
China shifted its tone in the last year towards private business and the technology sector, acknowledging it as a major driver of consumer and economic growth. That sentiment appears to continue this year.
“Boosting consumption is an important starting point for expanding domestic demand and stabilizing growth, but also a major measure to change the medium- and long-term development mode,” according to a statement from the recent State Council meeting presided over by Premier Li, reported KraneShares. “We should put consumption in a more prominent position and rely more on boosting consumption to expand domestic demand, smooth the economic cycle, and stimulate economic growth.”
In addition to domestic regulatory support, innovations in AI create further growth potential for China tech companies. The explosion of DeepSeek onto the AI scene sent shockwaves through markets in January. The China startup not only offers competitive AI models on par with top performing models from U.S. companies, but it did so at a fraction of the cost to develop. DeepSeek AI models also are mostly opensource.
Such innovation can benefit a number of major China tech players within the AI ecosystem. In fact, Alibaba reported Q4 earnings yesterday, with beats in revenue, adjusted net income, and adjusted EPS, according to KraneShares’ China Last Night blog. The company cited the AI infrastructure buildout as a driver for future cloud demand. They also noted that U.S. chip restrictions would not impact the business.
See also: DeepSeek a Pivotal Turning Point for China’s AI Revolution
KWEB Captures China Internet Growth
The KraneShares CSI China Internet ETF (KWEB ) measures the performance of publicly traded companies outside of mainland China that operate within China’s internet and internet-related sectors. It seeks to track the CSI Overseas China Internet Index. The Index provides exposure to the China internet equivalents of Google, Facebook, Amazon, and eBay. It trades in securities on the Nasdaq Stock Market, the Hong Kong Stock Exchange, and the New York Stock Exchange.
KWEB is up 19.63% year-to-date, as of February 19, 2025, according to Y-Charts data. Over the last 12 months, the fund is up 42.29%.
Top holdings within the fund include Alibaba at 11.58% weight, Tencent at 10.71%, and PDD Holdings at 7.27%, as of February 20, 2025. In the last two years, the fund has worked to convert all possible share classes to Hong Kong shares. It’s a calculated move away from ADRs to protect investors from added risk. Currently, 65% of assets held by KWEB list in Hong Kong, while 33.2% list on U.S. exchanges.
The ETF carries an expense ratio of 0.70%.
For more news, information, and analysis, visit the China Insights Channel.
