Temasek bullish on China AI, consumer opportunities, economic challenges: Report

SINGAPORE: Temasek Holdings has a long-term positive view on China, focusing on artificial intelligence (AI) and emerging consumer sectors, even after a slight drop in its market exposure, according to the fund’s China head.

In an exclusive interview with financial news publication Yicai Globa, Wu Yibing, CEO of Temasek (China), observed, “Temasek has strong confidence in China. The Chinese market remains attractive for long-term investors.”

The state investment fund of Singapore saw its investment portfolio reach a record S$434 billion (US$337.4 billion), with China’s share decreasing slightly to 18% from 19% last year. However, Wu stressed that this does not show less interest, as the actual value of China holdings increased by about S$4 billion.

“Compared to high US stock prices, Chinese stock valuations have returned to long-term average levels,” Wu explained. The fund sees particular promise in two key areas: AI and consumer goods.

Wu believes China’s biggest AI potential lies in business-to-business (B2B) applications due to AI being a “long-term variable.” From Wu’s perspective, AI applications in the B2C (i.e., consumer) are still at the “elementary school level.” Meanwhile, the B2B opportunity represents a large, long-term opportunity, due to how AI can improve labour productivity across different industries.

China also faced constraints in computing power to support complex AI operations at scale. This is due to export restrictions by the US on high-end chips, but it also has underappreciated advantages in areas such as power grid technology. Wu observes: “AI is essentially the next generation of IT infrastructure.”

He emphasises that AI has the capacity to embed next-gen technologies across local industries, and this can help build a complete industrial chain. The state fund is investing heavily in AI, especially in B2B applications, among its portfolio firms. This gels with the view that AI presents a transformational long-term opportunity.

Temasek sees opportunities in China’s consumer market. Signs of the market maturing include growing household savings, more discretionary spending, and local brands gaining ground on foreign competitors.

China brands like Pop Mart, Mixue Group, and Luckin Coffee demonstrate strong consumer momentum. Despite economic challenges, Wu remains confident. “From the perspective of economic development and valuation, China continues to provide strong investment opportunities,” he adds.

Temasek’s approach shows a multifaceted understanding of China’s complex economy. China’s 2025 economic slowdown shows major problems. An ageing population, a workforce shortage since 2013, and high public debt are some of them.

These pressures have revealed weaknesses in China’s economy, which relies on debt. The public sector is trying to improve economic growth. This is by backing projects in green energy, automation, AI, and focusing on quality over quantity. However, the role of state-backed businesses and other financial limits make such things difficult.

As a result, global investors must be strategic with China investments. They should consider the possible benefits of rural revitalisation and technological self-reliance. They also need to exercise caution around risks associated with property assets and state-owned enterprises’ debts.