Rethinking the logic of investing in China to capture real opportunity

Editor's note: Ge Lin is a CGTN economic commentator. The views expressed in this article are the author's own and do not necessarily reflect those of CGTN. 

Much of traditional investment thinking about China has focused on low costs, high efficiency, and attractive profits. While this logic still holds some relevance, it no longer captures the real opportunity.

Today, investing in China requires a new framework: one that recognizes the country's growing ability to generate invisible returns. These returns are not always immediately reflected in financial statements, but they compound over time, such as access to frontier innovation, immersion in accelerated knowledge cycles. Missing out today could mean falling behind tomorrow.

The real prize is no longer just about expanding market or chasing efficiencies. It's about securing a position inside an ecosystem where next-generation technologies are born, and ensuring long-term competitiveness.

As FDI slows in China, smart capital doubles down

The slowdown in foreign direct investment (FDI) inflows to China over the past couple of years has been seen by some as a sign of weakening investor commitment. While shrinking profit margins, driven by intensifying competition, along with rising global interest rates, help explain this trend, such traditional financial indicators fail to account for the strategic gains unfolding within China's fast-evolving innovation ecosystems.

Tellingly, the world's most discerning capital continues to double down. In Forbes' 2025 global billionaire ranking, 16 of the world's top 20 wealthiest individuals remain closely tied to China through business operations, partnerships, and direct investments.

Oracle CEO Larry Ellison has invested strategically in China's database software and cloud services. Dell is targeting China's digital transformation and smart manufacturing sectors. Tesla has deeply embedded itself in China's new energy landscape through its electric vehicle production, energy storage business, and data center operations. Nvidia recently noted its 30 years of active involvement in China's semiconductor sector. Warren Buffett identified China's promise early, investing in BYD as early as 2008.

Unlike the old playbook – which focused on outsourcing or tapping low-cost labor – these ultra-high-net-worth investors are prioritizing China's high-tech sectors. This reveals a strategic recognition: China's future-defining forces are shaping pathways that global players can no longer afford to sit out.

China's industrial commons: An ecosystem where knowledge compounds over time

One of China's most significant strategic assets is its industrial commons. Originally a manufacturing concept, the industrial commons refers to a shared pool of technical knowledge, skilled labor, supplier networks, and process innovations that competitors collectively depend on.

China has scaled this concept to an unprecedented national level, not just through the sheer size of its manufacturing base, but through the extraordinary density, connectivity, and frequency of interactions among millions of factories, labs, research institutions, and engineering teams. Knowledge from different sectors and across all stages of production collides, fuses, and evolves at high speed, forming powerful positive feedback loops that continuously upgrade the living system.

In this environment, the knowledge turnover rate – the speed at which ideas are tested, refined, and transformed into commercial products – consistently outpaces that of other major economies.

Crucially, the know-how embedded in these systems cannot be easily codified, transferred, or transplanted. This is not knowledge that can be captured in a manual or packaged into a licensing deal; it is deeply contextual. Being inside China's industrial commons means gaining access to system-level know-how that underpins the next wave of industrial leadership.

A new valuation paradigm is required for investing in China

When investors stuck in yesterday's playbook continue to apply traditional capital pricing models to China, they are making a category error, akin to measuring electromagnetic fields with a thermometer.

Evaluating the real value of investing in China today requires a new paradigm. Investors must begin to price in the density and velocity of knowledge, the scale of R&D networks, and the speed at which patents and technologies move from lab to factory floor. These elements form an intangible yet compounding source of strategic advantage.

Another critical factor is regulatory adaptation. The agility with which China pilots, adapts, and scales regulation for emerging industries is becoming a key competitive differentiator. From fast-tracked frameworks for autonomous driving to the rollout of low-altitude economy pilot zones for drone-based logistics and urban air mobility, China's policy agility creates rapid pathways from experimentation to mass deployment.

Tectonic shifts in foreign investment into China

Critics point to slowing FDI numbers and declare a capital retreat. But they are missing the deeper tectonic shifts. As lower-order capital – the kind that chases short-term profits – pulls back, smart capital is drilling into the deep knowledge reserves that will shape tomorrow's competitive advantage. The global investment map is being redrawn, and China is now written into the very center of what's to come.