China Daily Briefing

SCMP reporting confirms BYD and Chery are experiencing 80%+ overseas growth as Chinese EVs reclaim market share that international brands briefly won back in early 2026. Tech upgrades — particularly intelligent driving and in-car AI features — combined with government incentives are squeezing foreign brands' temporary gains. The read for equity markets: BYD's overseas margin profile improves as scale builds, but the EV/Mobility sector's -4.19% session decline suggests institutional investors are already positioned and taking profits on the data. Watch BYD H-shares in Hong Kong versus A-shares for the next rotation signal.

SCMP reports clear evidence that mainland Chinese investors are pulling capital from Hong Kong equities and redeploying into onshore yuan-denominated A-shares, specifically chasing the AI infrastructure narrative. This Northbound-to-onshore rotation is the mechanical reason HK's iShares MSCI HK ETF was -2.93% when the FXI was 'only' -1.75% — HK suffers disproportionate outflows. Zhongji Innolight, an optical module supplier to US AI hyperscalers, is now the largest-weight stock in the CSI 300 by market cap — a metric that would have been unthinkable 12 months ago and signals how fast AI has restructured the onshore index composition.

Against the offshore sell-off narrative, SCMP reports that UBS analysis shows foreign investors ARE returning to China — but through structured instruments: IPOs and convertible bonds rather than secondary market equity. This is risk-controlled re-entry: foreigners want China growth exposure but limit directional equity risk via convertible structures. The policy implication: China's capital market authorities appear to be encouraging this path — issuance volumes in both categories are rising. For the A/H premium trade, foreign participation via convertibles reduces the arbitrage window but doesn't eliminate it.