(Yicai) July 17 -- Temasek Holdings maintains a long-term optimistic outlook on China, with a focus on artificial intelligence and emerging consumer sectors, even as its exposure to the market slightly declined in the last fiscal year, the fund’s China head told Yicai in an exclusive interview.

“Temasek has enduring confidence in China, and the Chinese market is attractive," said Wu Yibing, the chief of the Singapore-headquartered company's China business. He added that as a long-term investor, Temasek places high importance on dividends and continues to prioritize technological innovation.

China’s market has shown increasing maturity in areas such as consumption and technology -- particularly in AI. Temasek will also continue monitoring the recovery of the real estate sector, Wu said.

Reduced Exposure, Continued Investment

Temasek’s investment portfolio reached a record SGD434 billion (USD337.4 billion) in the fiscal year ended in March, up 12 percent from a year earlier.

However, its portfolio share in China edged down to 18 percent from 19 percent a year ago. Two years earlier, China accounted for 22 percent, marking the first time it fell below the Americas’ share.

The fluctuation is influenced by several factors, including stock market performance around reporting periods and delays in recognizing primary market investment returns, Wu explained.

Although China’s capital markets rebounded significantly last year, the recovery in initial public offerings has only just begun, he said. As nearly 49 percent of Temasek’s global investments are in the primary market, returns in China are only realized when firms list or are acquired.

Given Temasek’s strong global growth last year, its allocation to China remains significantly overweight at 18 to 19 percent compared with other global investors or benchmarks, Wu noted. Despite the reduced percentage, the absolute value of Temasek’s China holdings rose by about SGD4 billion (USD3.1 billion) over the past fiscal year, he added.

"From the perspective of economic development and valuation, compared with the fact that US stocks are no longer cheap, Chinese stock valuations have recently recovered to their long-term average levels,” Wu said.

Temasek is also expanding local fundraising capabilities. Last month, True Light Capital, its asset management platform, registered True Light Shanghai Private Equity Fund Management with the Asset Management Association of China. The new fund manager targets domestic limited partners and aims to invest in innovation-driven firms.

This marks a strategic shift. Since its founding in 2021, True Light Capital has primarily used the qualified foreign limited partner program to channel overseas capital into China.

Betting on B2B AI Applications

Temasek has actively invested across the global AI value chain, including through direct investments, Wu said. He believes China’s biggest AI potential lies in business-to-business applications.

“AI is a long-term variable,” he said, noting that AI application in B2C are still at the “elementary school level,” while B2B represents the largest long-term opportunity and explains much of the recent US stock rally. “AI can improve labor productivity in all industries.”

In terms of computing power, China still faces challenges -- particularly in chips -- but has underappreciated advantages in areas such as power grid technology, Wu added. “AI is essentially the next generation of IT infrastructure,” he said, emphasizing that AI will embed next-gen technologies across local industries and help build a complete industrial chain.

Signals of a Maturing Consumer Market

China’s consumer sector is showing signs of maturity, Wu said. Rising household savings suggest the main barrier to spending lies in willingness rather than purchasing power, reflecting structural factors.

On the demand side, discretionary and service-related consumption are becoming key drivers. On the supply side, more consumer brands are moving beyond basic functionality to deliver emotional value -- both signs of a maturing market.

Emerging domestic brands such as Pop Mart International Group, Mixue Group, Luckin Coffee, and Xiaomi Automobile are increasingly displacing foreign competitors in terms of cost-effectiveness and intellectual property, Wu said.

He also cited rapid growth at chains like Luckin Coffee and Yum China Holdings -- the local operator of KFC, Pizza Hut, and Taco Bell -- as further evidence of market momentum driven by successful strategies.

Editor: Emmi Laine