Sovereign wealth funds are reinvesting billions of dollars in mainland China and Hong Kong, reversing the previous slump in investment, with Middle Eastern investors taking the lead.

Data provided by Singapore consultancy Global SWF to CNBC shows that in the first nine months of 2026, investments flowing into mainland China and Hong Kong reached $14.2 billion, representing a 190% increase compared to the total investments made by these funds throughout 2025.

This stands in sharp contrast to 2025: affected by geopolitical tensions and market concerns about China's economic prospects, investment plummeted by 54% compared to the previous year.

Data from Global SWF shows that this year's rebound has been mainly driven by sovereign investors from the Middle East, with Saudi Arabia's Public Investment Fund contributing $6 billion alone, followed by Abu Dhabi Investment Authority with $2.5 billion.

Mubadala of Abu Dhabi and the Qatar Investment Authority invested $800 million and $600 million respectively.

These four Gulf funds together account for nearly 70% of the sovereign investments flowing into China and Hong Kong during the same period, highlighting the increasingly important role of Middle Eastern capital in the region.

The renewed interest in China stems from sovereign investors increasingly preferring to seek opportunities beyond geopolitical tensions, placing bets on China's technology, biotechnology, consumer businesses, and advanced manufacturing industries.

Li Yingshan ( Jenny Lee ), a senior managing partner at Granite Asia Investment Management Company, stated: "I believe that China has evolved from being considered 'uninvestable' to 'is China still investable?' And today, the question I hear most often is: 'Have we missed any opportunities?'"

Lee indicates that as the development of artificial intelligence increasingly expands from cutting-edge models to industry-specific applications, including robotics and drug discovery, China's existing advantages in manufacturing and biotechnology may give it a competitive edge.

She added that China's vast network of factories and research laboratories provides real-world data for the development of these applications, and such data is likely to become increasingly valuable in the future.

Attractiveness increases

For Mubadala of Abu Dhabi, Asia as a whole is becoming an increasingly important investment destination, as this sovereign investor wishes to diversify its portfolio and increase its exposure to long-term growth opportunities.

Andrew Wang, who is in charge of Mubadala's private equity consumer business, stated that as the fund continues to expand its presence in Asia, the company sees attractive opportunities in China, due to factors such as attractive valuations and China's vast consumer market.

Wang said to CNBC: “The valuation is lower than it has been in many years. I think this will be a very good year for Chinese investors.” He also mentioned that China is the top priority for the fund in its consumer investments in Asia, as household consumption is expected to expand and the competitiveness of Chinese brands is also increasing.

He stated that Chinese companies are increasingly shedding the impression of "producing cheap goods" and shifting towards products with higher added value, while local brands are also demonstrating stronger innovation capabilities and competitiveness on a global scale. In September, Mubadala announced an equity investment in Luckin Coffee of China, which is part of a deal worth approximately $1 billion with Centurium Capital.

From cautious to resolute?

This year, other large funds have also shown interest.

The Qatar Investment Authority and Norway’s sovereign wealth fund participated in Alibaba’s $10.2 billion stock issuance in August, while Singapore’s Temasek is looking for opportunities in China, with a particular focus on biotechnology, domestic consumer brands, and hardware related to artificial intelligence.

Temasek's Chief Investment Officer Rohit Sipahimalani recently stated at the Milken Summit in Singapore: "China is still very attractive."

He said, "Biotechnology is particularly an exciting field, and we are investing in it. Local consumer brands can also be very important."

Sipahimalani also mentioned that China's competitiveness in the AI hardware supply chain is continuously increasing, and predicted that Chinese manufacturers will increasingly challenge existing global players.

Temasek is one of the cornerstone investors in the initial public offering (IPO) of Gigalight, a optical module manufacturer, which raised several billion dollars in July.

The chief investment officer of Indonesia's sovereign wealth fund Danantara, Pandu Sjahrir, told CNBC that the fund also hopes to expand its cooperation with China beyond the existing nickel processing and battery manufacturing partnerships, and is showing growing interest in artificial intelligence, robotics, healthcare, and energy efficiency.

This Indonesian sovereign investor believes that, by leveraging its energy resources, it is possible to develop digital infrastructure and downstream industries related to AI.

He said, "We already have someone in charge of our business in North Asia. She is also based in China, and her role within the team is to figure out 'how we can establish long-term partnerships, especially in the downstream segments?'"

Despite the obvious rebound, China remains a relatively smaller destination for sovereign wealth fund capital compared to Western markets.

According to the data from Global SWF, in the first nine months of 2026, the United States attracted $132.4 billion in sovereign investment, while Europe and the UK received $44.6 billion. In contrast, China and Hong Kong's $14.2 billion accounted for only a small portion of this total.