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Sovereign wealth funds are pouring billions of dollars back into mainland China and Hong Kong, reversing a sharp investment slump, with Middle Eastern investors leading the charge. Investments into mainland China and Hong Kong surged to $14.2 billion in the first nine months of 2026, surging 190% compared with the funds' investments through the entire 2025, according to data provided to CNBC by Singapore-based consultancy Global SWF. That's in stark contrast to a 54% plunge in 2025 from the prior year as geopolitical tensions and concerns over China's economic outlook weighed on investor sentiment. The resurgence this year has been driven largely by Middle Eastern sovereign investors, with Saudi Arabia's Public Investment Fund alone accounting for $6 billion of the inflows, followed by Abu Dhabi Investment Authority's $2.5 billion, data from Global SWF showed. Abu Dhabi's Mubadala and Qatar Investment Authority have invested $800 million and $600 million, respectively. Together, the four Gulf funds accounted for nearly 70% of sovereign investments into China and Hong Kong during the period, underscoring the growing role of Middle Eastern capital in the region. Renewed interest in China comes as sovereign investors increasingly look beyond geopolitical tensions to capitalize on opportunities in Chinese technology, biotechnology, consumer businesses and advanced manufacturing. "I think China has gone from 'China is not investable’ to ‘is China investable?’ to today, the most common question I get is: ‘are we missing out?'" said Jenny Lee, senior managing partner at investment management firm Granite Asia. Lee said China's established strengths in manufacturing and biotechnology could give it an advantage as AI development increasingly expands beyond frontier models into industry-specific applications, including robotics and drug discovery. China's extensive network of factories and research laboratories provides access to real-world data that could become increasingly valuable in developing these applications, she added. Drawing interest For Abu Dhabi’s Mubadala, Asia in general has become an increasingly important destination as the sovereign investor seeks to diversify its portfolio and deepen exposure to long-term growth opportunities. Andrew Wang, who leads consumer division for private equity at Mubadala, said the firm sees compelling opportunities in China, citing attractive valuations and the country's vast consumer market as the fund continues to expand its presence in Asia. "Valuations are lower than they've been in years. I think this will be a really good vintage for investors in China," Wang told CNBC. He said China was the fund's top priority for consumer investments in Asia, pointing to the potential for household consumption to expand and the growing competitiveness of Chinese brands. Chinese companies were increasingly moving beyond their reputation for producing inexpensive goods toward higher-value products, Wang said, as homegrown brands demonstrate stronger innovation and competitiveness globally. Mubadala announced a minority investment in China's Luckin Coffee in September, as part of a roughly $1 billion deal alongside Centurium Capital. From caution to conviction? Other big funds have also shown interest this year. Qatar Investment Authority and Norway's sovereign wealth fund participated in Alibaba's $10.2 billion share offering in August, while Singapore's Temasek is identifying opportunities in China, particularly in biotechnology, domestic consumer brands and AI-related hardware. "China continues to be interesting," said Rohit Sipahimalani, Temasek's chief investment officer, at the Milken Summit in Singapore recently. "Biotech in particular [is] a very exciting area out there which we're investing in. Local consumer brands could really be important," he said. Sipahimalani also pointed to China's growing competitiveness across the AI hardware supply chain, predicting that Chinese manufacturers could increasingly challenge established global players. Temasek was among the cornerstone investors in optical-components manufacturer Zhongji Innolight's multibillion-dollar initial public offering in July. Pandu Sjahrir, chief investment officer at Indonesian sovereign wealth fund Danantara, told CNBC that the fund was also looking to expand its cooperation with China beyond its existing partnerships in nickel processing and battery manufacturing, with growing interest in artificial intelligence, robotics, healthcare and energy efficiency. The Indonesian sovereign investor sees opportunities to build on its energy resources to develop AI-related digital infrastructure and downstream industries. “We now already have someone to head North Asia for us. She's also based in China, and her job as a team is "how do we develop long-term partnership, especially in the downstream side?" he said. Despite the sharp rebound, China remains a relatively small destination for sovereign wealth fund capital compared with Western markets. The U.S. attracted $132.4 billion in sovereign investments in the first nine months of 2026, compared with $44.6 billion for Europe and the U.K., according to Global SWF data. China and Hong Kong's $14.2 billion represented just a fraction of those flows.
document fetched 2026-10-22 03:00 · canonical https://cnbc.com/2026/10/22/sovereign-wealth-funds-china-hong-kong.html