Although many of her peers – even some emerging markets managers – are sceptical about whether China has turned a corner, Tiffany Hsiao (pictured) asserted the government is backing sectors of innovation.
Chinese companies were “positively surprised” by the swathe of tariff announcements from the White House last year, as initial fears of being singled out by US President Donald Trump made way, only for him to “tear up the entire world”.
That left Chinese imports "still the cheapest option", according to Tiffany Hsiao, fund manager at Matthews Asia, with limited impact on competitiveness.
Hsiao rejoined Matthews Asia in December 2025 after spending five years at Artisan Partners, where she launched a China-focused private fund. She now manages the firm's China Small Companies fund, China Discovery active ETF, Asia Innovators fund and Asia Innovators active ETF.
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She said those five years were defined by risk management. Initially, China was an up-and-coming emerging market, but "suddenly, everything went south, whether it was the self-inflicted wounds from its Covid policy, the crackdown on internet companies or intensifying geopolitics".
Now, China is resurfacing into an era where companies and investors have adapted to a new paradigm and are becoming more diversified, as the global geopolitical pendulum seemingly swings in its favour.
Geopolitics and entrepreneurship
In China, current volatility is viewed as a way to present itself as a global leader, projecting an image of a more collaborative, trustworthy, long-term partner with a steadier hand, said Hsiao.
"In terms of deal-making, they are being much more generous than in prior decades," she explained, noting that to avoid planned tariffs on automobile exports to Europe, the government negotiated a floor price for its vehicles to assuage fears that European companies would have their prices severely undercut.
"Instead of ‘sell, sell, sell at anyone's expense because we are the world's cheapest manufacturer', they are now very methodical and saying, ‘we understand your local situation, we want to be additive, we want to be a partner, not a competitor'," she added.
Although many of her peers – even some emerging markets managers – are sceptical about whether China has turned a corner, Hsiao asserted the government is backing sectors of innovation.
"China is not just about property anymore," she said. Instead, the government's recent five-year plan is providing ample tailwinds in sectors related to artificial intelligence and healthcare, two areas Hsiao is particularly bullish about, as China's ability to "do more with less" means it is much stronger commercially in these areas.
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"Decades ago, you would never hear of China being an innovative place for healthcare. But now, half of the world's molecules that are going into human clinical trials are from China and foreign national healthcare companies treat China as a Costco," she explained.
Likewise, she compared the US approach to advances in AI – where there is still a lot of aspiration to get to artificial general intelligence – as "like taking a shuttle to the moon approach, versus taking an aeroplane from one city to another, which is China's approach".
"They may not have the smartest models, but their models can make money quickly. So, I think the aeroplane tickets will probably sell faster than the spacecraft," she speculated.
Meanwhile, holding a Labubu up, Hsiao said China has done a better job at intellectual property protection: "In every sector, they are trying something new and truly innovative. There is a very clear understanding now in China that you innovate your way out of a problem, not just cut prices and copy other people's innovation."
However, she noted two anti-consensus calls investors should be aware of. First, that inflation is returning, something she said is "very evident" across a slew of companies she has been talking to, and second, that she is not as bullish about internet companies as perhaps many of her peers.
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"When people think about investing in China, the easy way is to go back to your favourite internet companies, right? And I think this time round, you have to be quite nuanced about it," she said, explaining that policy risk is a concern as the sector comes under the scrutiny of government audit.
Hsiao explained she looks to invest in entrepreneurs who are trying to move society forward, taking inspiration from her father who was part of the team that built the world's first laptop computer with an Intel 386 processor – a huge technological leap forward in 1985.
"What inspired me was not just what he created, but, after he retired, he continued to invest in the next generation of Taiwanese innovators. He continued to give back to his community," she said, adding: "That is really my life's mission. I am trying to find more people like my dad."
