China’s ‘Rocket Stocks’ Surge as Investors Bet on Space Race with US | SCMP

Shanghai, China – Chinese stock investors are increasingly turning to companies involved in commercial aerospace, viewing the sector as a potential successor to the recent artificial intelligence (AI) boom and a key arena in the ongoing technological rivalry between Beijing and Washington. A gauge tracking these companies has demonstrated significant growth, outpacing broader market indices, according to data released by Shanghai DZH Financial Investment.

The aerospace gauge, comprised of companies listed on the Shanghai and Shenzhen exchanges, has risen approximately 10 percent so far this year, building on a substantial 76 percent increase recorded throughout 2025. This performance significantly exceeds the 2 percent gain seen in the benchmark CSI 300 Index, signaling a clear shift in investor sentiment. Companies like China Spacesat and Hunan Aerospace Huanyu Communication Technology have been among the biggest beneficiaries of this trend.

The surge in investment is fueled by expectations of increased policy support from the Chinese government and a belief that the cost of rocket launches within China will decrease, potentially reaching parity with those offered by US-based SpaceX. “With policy support, the cost of rocket launches in China is expected to come down and even match that of SpaceX,” stated Hou Bin, an analyst at Great Wall Securities. “We are positive on an acceleration of domestic substitution in commercial aerospace going forward. That will create investment opportunities in a number of downstream industries.”

This growing interest in the aerospace sector comes as China prioritizes technological self-reliance and seeks to reduce its dependence on foreign technologies, particularly those originating from the United States. The country’s latest five-year development plan identifies aerospace as a key strategic area, with a series of tests for reusable rockets already underway, demonstrating a clear commitment to competing in this rapidly evolving field.

The shift in investor focus also reflects broader economic trends within China. Recent data from Shanghai DZH indicates a decline in dollar-denominated fundraising for Chinese startups, as tensions with the US intensify. During the first eight months of the current year, these companies raised USD 6.6 billion from abroad, representing just over 10 percent of total funding – a sharp decrease from the roughly 50 percent recorded in 2018. This trend is prompting a greater reliance on domestic funding sources, including government-affiliated investment companies.

This increased government involvement is exemplified by the upcoming initial public offering (IPO) of Z.ai (formerly Zhipu AI), a Chinese artificial intelligence company. Its shareholder base includes funds backed by municipal governments in both Beijing and Shanghai, as well as prominent Chinese technology firms like Alibaba Group. China International Capital Corporation, an investment bank with partial state ownership, will lead the IPO, underscoring Beijing’s commitment to supporting domestic technological innovation.

The situation surrounding Z.ai is particularly noteworthy, as the US government added the company to its list of foreign entities subject to export restrictions in January, citing concerns about its contributions to the modernization of the Chinese military. An IPO under these circumstances would represent a significant step for Beijing in its efforts to lessen its reliance on the United States.

According to Naotaka Sonoda, a senior economist at PwC, “Beijing is strengthening its presence in the startup ecosystem in China.” Data from US research company PitchBook shows that government-affiliated investment companies participated in roughly 16 percent of funding rounds in the first quarter of the year, a substantial increase from less than 5 percent a decade ago.

The move towards domestic funding is further evidenced by a shift in currency denomination for fundraising. Shanghai DZH’s data reveals that the proportion of funds raised in US dollars has been steadily declining since the late 2010s, peaking in 2021 and subsequently falling as total fundraising amounts have also decreased. Most funds raised between January and August of the current year were denominated in the local currency, the Renminbi.

The growing emphasis on commercial aerospace is not merely an economic strategy. it is also deeply intertwined with geopolitical considerations. The competition between China and the United States extends beyond traditional economic spheres and increasingly encompasses technological dominance in areas like space exploration and reusable rocket technology. Investors are betting that China will dedicate significant resources to closing the gap with the US, particularly in light of SpaceX’s advancements in reusable rocket technology and ambitious lunar programs.

The recent successful low-altitude demonstration and verification flight test of the Long March-10 carrier rocket and a flight test for the new-generation crewed spaceship system Mengzhou, conducted at the Wenchang spacecraft launch site in Hainan province on February 11, 2026, serve as a tangible demonstration of China’s commitment to advancing its space capabilities. These developments are likely to further fuel investor enthusiasm and solidify the aerospace sector’s position as a key battleground in the ongoing technological rivalry between the two global powers.

The implications of this trend extend beyond the Chinese market. A successful domestic aerospace industry could reduce China’s reliance on foreign suppliers, strengthen its position in the global space economy, and potentially reshape the dynamics of international cooperation in space exploration. The coming years will be crucial in determining whether China can achieve its ambitious goals in this strategically important sector.