Chinese regulators cite imported risk as AI stocks follow Wall Street

Korean chipmaker swings rattle Chinese tech through sentiment, not capital

For years, Beijing has promoted a story of technological self-reliance: a semiconductor supply chain that does not depend on Washington’s approval, artificial-intelligence models that do not rely on American chips or code, and an economy determined to prove it can innovate on its own, The Wall Street Journal reported.

The narrative gained force last year when DeepSeek, an AI startup, debuted its models to domestic acclaim. A more recent splash by Moonshot AI’s Kimi carried a different emphasis — not just that China can compete, but that its cheap, open-source models might win, according to the Journal.

So when Chinese stocks sold off hard this month, the official response was revealing. Regulators pointed not at any domestic development but at 境外输入性风险 — risk imported from abroad, the Journal reported. A Chinese fund manager told the Journal that the mainland market’s swings are “driven by the AI trade in the United States.”

The Korea link became part of the story as well. Chinese investors have little money in Korean stocks, and Korean money is not a major presence in Shanghai or Shenzhen, according to the Journal. Yet when South Korean chipmakers, riding the same memory-chip windfall as China’s own ChangXin Memory Technologies, or CXMT, went into a speculative frenzy and then cracked, they rattled Chinese tech. Sentiment, not money, transmitted the shock.

Some analysts told the Journal that Chinese tech valuations are, if anything, more stretched than Korea’s, resting on a domestic-substitution story that assumes China’s champions deserve to trade like Nvidia’s ecosystem without Nvidia’s numbers behind them. When that trade wobbles, Chinese tech needs no direct financial link to catch the chill.

Beijing’s response made the same point differently. Huijin, the state-investment arm that acts as China’s plunge-protection team, stepped back into the market last week, buying broad-based exchange-traded funds tied to stock indices to stabilize the market, the Journal reported. But the real repair job — stabilizing the tech names that cratered — depends, at least in part, on sentiment holding steady in the U.S. and Korea.

The industrial base beneath the AI push is genuine, the Journal noted. During a four-hour investor session held earlier this year, Liang Wenfeng, DeepSeek’s founder, said AI could eventually account for 10% of global GDP and warned that any company hoarding that prize would leave it “abandoned by history.” The speech is being read domestically the way market participants once read Politburo readouts, according to the Journal.

What is premature, the Journal reported, is the price. Memory chipmaker CXMT went from years of losses to blowout profits almost overnight — not from a business transformation but from a global supply shortage that everyone is rushing to exploit. The company raised $8.55 billion in China’s largest IPO in over 15 years, boosting its market valuation to $484 billion. Stellar earnings now barely move shares, because the rally already priced in the blowout.

The irony, the Journal reported, is that Beijing’s technological-independence push is being financed and validated by market logic developed in America and tested in South Korea. China wants the world to look at its AI industry the way it looks at America’s. For now, if China’s own regulators are to be believed, China’s market is still the one doing the looking.