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Portfolio Manager Insights
China may be quietly redefining the rules of innovation
China is in the midst of an “innovation revolution,” with transformative trends unfolding in electric power, biotechnology and computing, says Fidelity’s John Dance.
- China is hardly a sleeping giant when it comes to innovation, according to Fidelity Portfolio Manager John Dance, who believes several forces are helping to drive lower costs, cutting-edge tech and global deals across industries.
- “Fundamentally, I believe there are some incredibly positive trends afoot in China that I think could redefine the global investment landscape,” says Dance, who manages Fidelity Advisor® Emerging Markets Fund.
- In helming the diversified emerging-markets strategy since 2019, Dance’s approach is anchored by his belief that market inefficiency is driven by investor psychology, market microstructure and asymmetric information, which can lead to mispricing and create opportunities for active management. He seeks companies with strong, stable growth characteristics.
- China’s dominance in electric power is no accident, according to Dance, noting that the nation has increased its lead by moving up the quality curve at attractive prices. Since 1991, the country has achieved a significant increase in electrical efficiency, due in part to businesses like Sieyuan Electric, a maker of power-transmission equipment and a sizable fund holding as of February 28, 2026.
- Dance notes that increasingly efficient electrical components, including solar cells, batteries and semiconductors, have driven China to the forefront of the electric-vehicle industry.
- “Look no further than lithium batteries,” explains Dance. “Production costs have plummeted, and energy density has steadily improved, making Chinese EVs more efficient and accessible, a powerful combination that is being felt by competitors throughout the global auto market.”
- Meanwhile, he says that for years China’s biotech industry relied on Western advances in medicine to be licensed within the country for local-market access. But today, the script has flipped.
- Chinese biotechs are now originating groundbreaking treatments – including widely popular antibody-drug conjugates and cell therapies – resulting in a surge of high-value licensing deals with Western pharmaceutical companies for global development and commercialization.
- “What’s fueling this shift?” asks Dance. “Lower development costs and streamlined regulatory processes. These advantages help Chinese firms to innovate faster and more affordably, creating potentially attractive investment opportunities in drug development. Here, Dance cites Hansoh Pharmaceutical as a notable position that’s leading the charge.
- Turning to computing, China lags the U.S. but has forged a new path to competitiveness, highlights Dance. While U.S. export restrictions have slowed the nation’s access to cutting-edge semiconductors, the country is finding alternative ways to grow computing capacity.
- With an estimated 9 million software developers, China has leveraged sheer scale to innovate through a “shots-on-goal” approach, he points out. This strategy is already yielding results, as demonstrated by the portfolio’s large stake in Alibaba Group Holding, which Dance believes could continue to push the boundaries of computing power.
- “I have been closely tracking these transformative trends in electric power, biotech and computing within China,” Dance concludes. “I am genuinely excited about the opportunities that lie ahead and believe this innovation revolution could have material implications from an investment perspective.”
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