Investors have overlooked some of China’s best growth stocks

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The trust is an actively-managed investment vehicle providing investors with broad access to China’s growth opportunities, from established technology leaders to entrepreneurial private businesses yet to list. Chinese equities have advanced strongly this year despite US-China trade tensions and a subdued property market. Low initial valuations and improving sentiment towards sectors driven by innovation (following DeepSeek’s breakthrough AI model) have also helped.

We focus on identifying companies with scalable growth potential, a sustainable competitive advantage and strong execution by managers. These often align with beneficiaries of long-term structural growth trends, such as China’s expanding domestic consumption and rapid technological innovation.

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China's growth opportunities

Hesai Group (Nasdaq: HSAI) is the world’s leading automotive LiDAR [light detection and ranging] provider, uniquely positioned at the heart of the fast-growing autonomous mobility revolution. As LiDAR becomes an essential component in advanced driver assistance systems (ADAS), Hesai’s ability to deliver superior technology at competitive prices sets it apart. As the market expands, Hesai is set to benefit from strong demand in increasingly sophisticated ADAS, which should help lead to substantial volume growth. While the vehicle industry will drive growth for many years ahead, there is also strong potential in other forms of mobility and robotics in the longer term. In addition, significant scope for margin expansion exists as volumes ramp up.

Xtep International (Hong Kong: 1368) has established itself as a leading Chinese sportswear brand specialising in the fast-growing running segment. Benefiting from the trend towards trading down in sportswear, Xtep is well positioned, combining affordability with a relevant brand.

Its sponsorship of marathon events and recognition for its shoes’ performance strengthen the brand’s credibility, while the strong growth of its premium Saucony brand broadens the product mix and supports the expansion of margins.

In the meantime, the company is trading at compelling valuations, while a solid dividend yield underpins attractive total shareholder returns. With strong branding and exposure to one of China’s most resilient consumer categories, I see Xtep as a structural winner in the domestic sportswear market.

Full Truck Alliance (NYSE: YMM) operates as China’s dominant digital freight-matching platform, leveraging powerful network effects to match shippers with truckers more efficiently than traditional offline brokers. Its scale creates a strong “moat” (an enduring competitive advantage), with network effects set to extend the group’s lead thanks to greater efficiencies and lower costs.

As penetration deepens and take rates (the percentage of a transaction for facilitating a sale) rise, Full Truck Alliance (FTA) is well positioned to deliver sustained growth in revenues from commissions, underscored by a record of resilient earnings with robust recent quarterly results. Having first invested in FTA as a private company, I’ve retained my long-standing conviction in its business model and strong execution. Since its public listing in June 2021, it’s remained a key portfolio holding, offering durable growth potential as China’s logistics industry continues its structural shift online.

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Dale Nicholls joined Fidelity International in 1996 as a Research Associate in our Tokyo office. In 2003, he was promoted to portfolio manager of the Fidelity Pacific Fund and retains management of that fund today. He was appointed as portfolio manager of Fidelity China Special Situations PLC in 2014. Prior to joining Fidelity, Dale worked at Bankers Trust Asia Securities in Tokyo and as a Market/Business Analyst at Sony Corporation, also in Tokyo. He graduated from the Queensland University of Technology in Australia.