China’s headline allocation remains a long way below its historical highs, but underneath the surface the picture is starting to change. A few highlights:

• Positioning is turning: China & HK’s average weight sits at 20.1%, well below the 30%+ peaks of 2020–21, but the underweight versus MSCI EM is now the narrowest for almost a decade, with 46.7% of funds now overweight.
• Managers are buying into weakness: despite average weights falling 4.7% YTD, 27 more funds added than trimmed, estimated net flows reached +$6.7bn, and 7.7% of funds switched to overweight.
• The stock story is changing: Tencent and Alibaba remain the anchor holdings, but some of the biggest ownership gains are now in semiconductor equipment and AI infrastructure, led by NAURA Technology and Zhongji Innolight, while CATL attracted an estimated $1.7bn in fund flows.