For the longest time, U.S. stocks have led the global markets, and no group has felt this more acutely than China stock investors since 2021, as China stocks have severely underperformed U.S. stocks.

But that’s changing—at least in 2025 so far, the tide has turned. The MSCI China Index has gained 18.7%, while the S&P 500 is down 4.6%.

The key question now: Can this China stock outperformance last? History has shown that China stocks can surge rapidly, only to experience sharp declines. And with the U.S. stock market still the global leader, any major shock in the U.S. is likely to ripple across world markets, including China.

we believe that there is a real chance that China stocks could continue to perform well, even if U.S. stocks struggle. Shifting market cycles, valuation re-rating, technological advancements, and changing global fund flows are aligning to China’s advantage.

That said, prudence is key. While China presents a compelling opportunity, one should not go all-in. Diversification remains important, and investors should allocate to China at a level they are comfortable with, balancing both opportunity and risk.

What’s clear, however, is that the China narrative has turned decisively more positive, with brighter prospects in 2025 than at any point in the past five years. If the momentum continues, we may be at the start of a sustained period of China stock outperformance—one that many investors have long stopped believing was possible.