China's innovation gains to draw more global investment, veteran regulator says

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Overseas portfolio investment in China is likely to increase over the next couple of years as the country's growing innovation capabilities and opportunities for portfolio…

Overseas portfolio investment in China is likely to increase over the next couple of years as the country's growing innovation capabilities and opportunities for portfolio diversification draw renewed international interest, veteran financial regulator Howard Davies said.

Davies, chairman of the International Advisory Council of the China Securities Regulatory Commission and former chairman of the UK Financial Services Authority, spoke to China Daily on the sidelines of the 2026 China Capital Market Annual Conference in Shanghai on Saturday.

He said advances over the past year had demonstrated China's ability to develop artificial intelligence models comparable to those in the United States, with relatively affordable offerings being used beyond China.

The innovation advances reflected a combination of supportive government policies, financing availability, university-trained talent and demand from manufacturers seeking productivity gains, Davies, who is also the author of the book Global Financial Regulation: An Opinionated Guide, said.

Chinese equities' movements had also differed from those in the US in the recent one to two years, offering international investors opportunities to diversify portfolios and reduce overall risk, Davies said. This had encouraged investors to take another look at China.

Davies said such attractions have translated into a broader improvement in investor sentiment, citing a recent Bank of America survey indicating a shift among some international fund managers to increase allocations in China.

"Sentiment has turned around. I would expect investment in China, particularly portfolio investment, to grow in the next couple of years," he said, adding that the outlook for foreign direct investment in China may depend more on the companies involved.

Davies also welcomed the changing composition of China's financing activity, saying that deeper capital markets could provide a buffer against economic fluctuations and reduce reliance on bank lending.

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