Why is it much harder to track China's tech disruptors for global investors after decoupling
In the wake of U.S.-China decoupling, Chinese companies like Unitree Technology and Deepseek are on the rise. However, the reality is that it’s becoming increasingly difficult for foreign investors to track these tech disruptors. Why is that the case, and what must investors do to ensure they don’t “miss China”?
Today’s article is kindly written by Bob Chen (LinkedIn), who shares his perspectives on why navigating China’s investment opportunities is more challenging and how investors can adapt to stay ahead.
Bob Chen is a UChicago-educated political scientist and economist and a good old friend of Baiguan. He started his career at one of China’s leading state-run think tanks before changing his career to become a venture capitalist while also writing part-time for the think tank.
Bob is also a prolific writer in the Chinese-language space. Recently, he wrote several highly successful articles about China’s policy-making. Some of those articles were censored, but many articles survived. We at Baiguan translated many articles from him, including a very popular one on how the rest of the world can actually benefit from US-China decoupling. We also recently translated an article from Bob explaining why the market has not been enthusiastic about the 3rd Plenum.
Bob is also among the first batch of experts we invited into our Discord community to help answer whatever questions you might have about China. Once you become our paying subscriber, you will instantly gain access to our community and engage with experts like Bob.
Why is it much harder to track China's tech disruptors for global investors after decoupling?
It was just beginning to drizzle when Wang Xingxing, the founder of Unitree Technology, pulled his black jacket tightly around him while he waited for his taxi alone. Moments earlier, he had presented a two-hour pitch to me and seven other investors, showcasing his flagship product: a robotic dog, along with a custom-assembled LiDAR, for which he sourced the chips himself rather than purchasing from system integrators. His extreme cost-consciousness left us all stunned. That was the last time I saw him, back in July 2023.
Fast forward a year and a half, and he found himself sitting across from President Xi at a national summit in February 2025. Among the other attendees were household names like Ren Zhengfei (Founder of Huawei), Pony Ma (Tencent), Jack Ma (Alibaba), and Liang Wenfeng—the founder of Deepseek and a quantitative trader. Unitree's valuation has also surged more than fivefold since I met him.
It was Deepseek’s meteoric rise in the U.S. that signaled the great return of China's tech assets. While many Western investors remained skeptical about how far this rebound could go, there was no denying that after a series of events—Covid, U.S.-China decoupling, and the Russia-Ukraine war—had once made Chinese assets seem uninvestable, the global investment community’s attention was once again turning toward China.
However, the challenges faced by Western investors were immense. After three years of the 'uninvestability' narrative, China’s market is now severely under-covered, if not undervalued.
People were shocked by these new Chinese tech disruptors, but in reality, these technological breakthroughs didn’t emerge overnight. The difficulty for overseas investors, many of whom have shut down Greater China offices, lies in how to track and evaluate these developments and, more broadly, how to assess whether China’s economy is truly bottoming out, whether public sentiment is changing, and whether entrepreneurs are regaining their confidence.
I count myself lucky to be positioned at the intersection of venture capital and macro research. As an economist in a VC fund in China, I’ve personally conducted due diligence on Unitree Technology. I’ve also been using AI tools to write programs for large-scale data analysis. After Deepseek V3 launched, I couldn’t help but share in my blog how much it would help me—switching from GPT to Deepseek would cut costs dramatically. I can totally relate to how cost reduction has made numerous AI applications affordable, which will undoubtedly spur the deeper penetration of AI across every sector of China. Before, most Chinese people had heard of GPT but hadn’t yet tried LLMs until Doubao, a Bytedance initiative, Kimi, another Chinese LLM startup, and Deepseek, made them accessible to the average household. Deepseek is just the latest breadcrumb leading to the GPT moment in China.
From my perspective, these changes have been gradual, building up over time. For Western investors, however, the information gap is massive. Overcoming this gap will be a critical challenge for investors outside of China, for several reasons.
First, many of the new tech disruptors are private companies, many of them startups—ranging from the makers of Black Myth: Wukong and the movie Nezha to Deepseek and its parent company, High-flyer, to Unitree Technology and even Rednote, which briefly emerged as a potential TikTok replacement for some U.S. users. These are all unlisted companies with limited information available. Overseas investors and investment banks are left to track them from behind the curve.
In China's VC market, the widespread withdrawal of foreign capital-backed VC funds since 2022 has only worsened this problem. For instance, Unitree Technology’s early investor includes a well-known U.S. dollar fund, Source Code Capital. But by 2024, rumors began circulating that Source Code’s founder would drastically reduce investments in the primary market, a point confirmed through conversations with their LPs. Conversely, many emerging hard-tech companies in China simply do not accept U.S. investments anymore for fear of scrutiny by both the Chinese and U.S. governments. In the investment world, it’s been described as the “iron curtain” of venture capital—a nod to Churchill’s famous speech about the Cold War.
The slowdown in China’s IPO market has only exacerbated the issue. IPO requires detailed disclosure of information. But IPOs absorb liquidity, and during the market downturn since 2022, regulators have largely paused IPOs on the A-shares market, while U.S. markets have been less welcoming to Chinese companies. The Hong Kong market, on the other hand, suffers from low valuations and low liquidity for smaller companies and has long been dominated by Western investors. Many of my fellow investors are struggling to find exit opportunities.
The result is straightforward: the information around many tech disruptors is obscure and inaccessible, even for many China-domiciled investors.
The second challenge for global investors is the nature of today’s tech competition. Even if one doesn’t invest in China, the unintended effects of Chinese tech disruptors cannot be ignored. Traditional measures like tariffs or export bans cannot easily hinder technological competition. Demand is high, and supply is scarce. Whoever can deliver a better product at a lower cost will attract users in droves.
When I listened to Wang Xingxing’s pitch for Unitree Technology, he told me that 50% of his sales came from overseas, many from research institutions. His product’s performance was on par with Boston Dynamics, but it cost just a tenth of their price. In his 200-person team, 100 were on the production line, which is how they kept costs low by deeply controlling the assembly process. Why should customers pay a premium for Boston Dynamics, a U.S. company, when they can get the same performance for a fraction of the price?
LLMs are also a prime example. The models are inherently language-neutral, meaning English-speaking users can use them seamlessly.
What has made the disruptors more formidable is a defining trait: often, by being the cost leader with an aggressive pricing strategy, they pose the biggest threat to pioneering U.S. companies, particularly those that aren’t hesitant to pour capital into their business and try to extract monopolistic profits in the future. Think of all the hyperscalers and StarGate, whose ROI has been put under question after Deepseek.
It has also caused problems with valuations. Many American companies are valued as if they would be monopolists, believing that only they can make these products in the foreseeable future. But Chinese companies are saying no. China’s vast market provides an abundance of users to help fine-tune products. The intense competition within China’s supply chains enables remarkable cost optimization. The engineers in China are much less paid than their U.S. peers. All these factors have earned Chinese products the moniker of “price killers.”
Therefore, even overseas investors who avoid Chinese assets must take these tech disruptors seriously.
Ironically, this is both a result of China's market dynamics and of American restrictive policies targeting China. Take Deepseek, for example. To utilize available GPUs and circumvent export bans, Deepseek significantly optimized its underlying technology.
This strategy of Deepseek has been extremely successful in China. Open-source and low pricing have led many apps to integrate Deepseek, creating a positive feedback loop. In China’s “GPT moment,” millions of ordinary Chinese people could now interact with large models directly on their smartphones. Major cloud providers, including Huawei, “BAT”, and others, also deployed Deepseek-r1 within a few days and charged very little to attract millions of users, which further fueled demand for Huawei chips as a cost-effective substitute for NVIDIA—whose exports were increasingly restricted.
Lastly, an interesting reason behind this under-coverage is that many of these tech disruptors hadn’t been on the Chinese government’s radar until recently. At one point, some were even being cracked down upon. Take Deepseek and its parent company, High-flyer, for example. Deepseek originated as a side project of High-flyer, a quantitative trading firm. Since 2023, regulators have imposed heavy restrictions on quantitative trading activities, including the derivatives they can use, raising their cost of trading. The reputation of quantitative trading has taken a hit, particularly because retail traders suffered significant losses in the bear market and blamed them for exploiting the market with tech advantages. This has led to significant performance discrepancies in the funds managed by High-flyer—its long-only strategies yielded a broad return of 17% in 2024, but its quantitative hedge funds saw losses ranging from -4% to -6%. Alibaba, also, was once a target of crackdowns.
I don't quite believe the rebound of Chinese assets is a one-off event, and it will likely be bumpy along the way. Around the National People's Congress in March, market speculation about the strength of stimulus policies will likely bring more volatility. Nor do I think this information gap will last forever. The impact of China’s tech disruptors has already spilled over to other asset classes. I can see that the correlation between the RMB exchange rate and stock returns is stronger than that with the trade balance. More funds with different strategies, including macro and long-short, will also begin to rethink and rerate China's factors.
But at this point, it certainly presents a bigger challenge for global investors, whether they view Chinese assets as investable or not. Some of my friends have done a great job trying to bridge the gap, such as holistic data service provider Baiguan and newsletter
, and they are different in that, originally from China, they have both localized and global perspectives. This is also the goal I hope to achieve.In my next piece, I plan to share some recent thoughts from a local perspective: besides the aforementioned tech disruptors, China is also experiencing some signs of "bottoming out." However, my perspective might differ from the trending view of international investment banks—more localized and more grounded in the everyday observations of households.
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