Global Market: China emerges as diversification bet for investors amid market volatility

Global investors are increasingly viewing Chinese markets as a diversification play amid recent volatility, with the yuan up about 5.4% against the US dollar over the past year and mainland blue-chip stocks delivering nearly 11% gains in US dollar terms in the first half. Foreign holdings of China onshore A-shares rose from 3.67 trillion yuan at end-2025 to over 4 trillion yuan by late May, and foreign investment in Chinese bonds turned positive in May for the first time in over a year. However, analysts caution that weak corporate earnings, a prolonged property downturn, and sluggish consumer demand in China limit its safe-haven appeal, with implications for emerging market fund flows including India.