Chinese tech stocks are made up of both blue-chip companies and growth stocks. Blue-chip stocks are often well-established, stable and provide consistent profits to investors. These are very useful for portfolio diversification, as they can help to offset the risk of trading smaller and more volatile shares, such as penny stocks, that may or may not grow to the same reputable level in the future. Growth stocks are usually funded by venture capital, a form of private financing for small or start-up businesses that have a high growth potential. Institutional investors such as mutual funds tend to invest in these companies at an early stage with the aim of making more profits in the long-term.
Buying shares in Chinese companies is especially promising in regards to the 5G revolution. The 5G industry provides hot stocks worldwide, where the general consensus is that Chinese tech giant Huawei is the main competitor, along with other US-owned companies including Verizon and Qualcomm. However, for as long as the US-China ‘tech war’ continues, the US is lacking 5G equipment and ideas, allowing China to overtake in the race for new technology. Read our article on the best 5G stocks to watch.