Animal Spirits Podcast

Talk Your Book: The Bull Case for China With Brendan Ahern

Date: January 12, 2026
Host(s): Michael Batnick & Ben Carlson
Guest: Brendan Ahern (Chief Investment Officer, CraneShares)

Episode Overview

In this episode, Michael Batnick and Ben Carlson dive into the complexities and opportunities of investing in China with Brendan Ahern, CIO at CraneShares and author of the “China Last Night” newsletter. The discussion focuses on breaking down misconceptions and realities in China’s markets, especially in the wake of significant policy and tech shifts. They also explore tech sector trends, AI competition, the aftermath of the Chinese tech bubble, and what global investors should know about the current bull case for Chinese equities.

Key Discussion Points & Insights

1. The Blind Spot of U.S. Investors Regarding China

• [00:53] Ben Carlson and Michael Batnick admit that China remains mysterious for many U.S. investors, despite being the world’s second-largest economy.
  • “We don’t really know a lot about China… I do think it’s kind of a blind spot for US investors. Is that fair to say?” — Ben Carlson
• The difference between China's economy and its stock market is markedly more pronounced than in other countries.
  • “The stock market does not equal the economy… No place is it more true than in China.” — Michael Batnick [01:39]

2. Dan Wang’s “Breakneck” & Understanding Chinese Society

• [03:09] The hosts discuss Dan Wang’s book, which frames China as an “engineering society” and explores its cultural and educational priorities.
• Brendan Ahern praises the book, specifically the chapters on Shenzhen’s manufacturing ecosystem.
  • “The chapter on the Shenzhen manufacturing ecosystem is worth the price of the book… You see, China is receiving the dividends of investing in STEM education from 10, 20, 30, 40, 50 years ago.” — Brendan Ahern [03:47]

3. Recapping China’s Tech Bubble: 2021–2023

• [05:24] Michael points out near-bubble dynamics in Chinese tech from 2021 to 2023, paralleling the U.S. tech bubble of the early 2000s.
  • KWEB (a China tech ETF) fell sharply: -49% (2021), -17% (2022), -9% (2023), but rebounded +25% in 2025 YTD.
• Brendan attributes the burst to multiple factors:
  • Archegos Capital’s risky leverage in Chinese ADRs
  • Deliberate policy shifts like popping the housing bubble, increased tech regulation (Ant Group IPO halt, online education crackdown)
  • Covid, “zero Covid” policy, and other regulatory missteps
  • “You had this whole host of policy errors that really slaughtered the China bulls.” — Brendan Ahern [05:53]
• The scars from this period linger, making investors wary of re-entering.

4. The AI Race: U.S. vs China

• [09:02] Open-source approaches in China contrast with U.S. closed, moat-building models.
  • Chinese companies (Deep Seek, Alibaba, Baidu) focus on free, open-source AI, emphasizing real-world business implementation.
  • U.S. companies (OpenAI, Anthropic) focus on proprietary models and monetization.
    • “In China, it’s more about implementing it across businesses… the real AI companies are really the cloud computing companies: Alibaba, Tencent, and Baidu.” — Brendan Ahern [09:02]
• Government policy (15th Five Year Plan) is highly supportive of tech self-reliance, urging domestic consumption and local innovation.
  • “The government is very geared… there’s definitely a policy tailwind to not just AI, but semiconductors, big data.” — Brendan Ahern [10:11]
  • U.S. export controls forced innovation, with Huawei’s Pro Mate 60+ phone cited as surpassing the iPhone.
    • “They innovated their way out of it by making a phone that’s arguably better than an iPhone.” — Brendan Ahern [11:01]

5. Investor Flows, ETF Dynamics & Currency Effects

• [12:29] KWEB sees increasing assets under management despite price declines. Most China-focused ETFs have closed; KWEB persists due to focus on growth/tech, not old economy sectors.
  • “Literally half of the China ETFs no longer exist.” — Brendan Ahern [12:29]
• Currency movements (US dollar trends) drive investor rebalancing globally. European investors, having benefited from prior dollar strength, are now reallocating, with 4x more money flowing into China ETFs in Europe versus the U.S.
  • “If that was a US equity ETF that had that inflow, it would be the 78th largest inflow year to date, which means in China ETFS basically there’s zero money despite… two pretty good years.” — Brendan Ahern [14:24]

6. China’s Public Attitude Toward AI & Demographics

• [15:52] In China, AI is seen as a tool, and adoption is government-driven, with far less public debate over impacts on labor or ethics compared to the U.S.
  • “I think it’s more the latter… I think it’s viewed as a tool.” — Brendan Ahern [16:20]
• Demographic headwinds and AI: Brendan suggests all countries face similar concerns and touts humanoid robotics as a possible solution, linking to their HUM ETF.

7. What Investors Are Betting On Buying China Tech

• [18:37] Are buyers betting on governance, earnings, or a market “re-rating?”
  • Brendan: “Part of it is a re-rating…” U.S. institutional investors face geopolitical headwinds, making Chinese equities an “off-limits” zone despite low valuations.
  • A U.S.-China trade thaw (e.g., possible Trump/Xi meetings in 2026) could drive risk re-assessment and inflows.
• Chinese tech includes diverse sectors: e-commerce, payments, online gaming, video streaming, etc.—many companies are value plays beyond Alibaba.

8. Market Structure, Company Analysis & Consumer Dynamics

• [20:41] Mainland (A-share) market trades at high valuations due to capital controls, with growth focused in Hong Kong-listed names backed by global private equity.
• Example: Meituan (restaurant delivery) is battling JD in price wars, hurting profits.
  • “You basically can order restaurant delivery for free in China today because these two companies are just battling it out for market share and it’s really hurt their bottom line.” — Brendan Ahern [22:32]
• Chinese consumers are wealthy but cautious, with portfolio impacts from real estate declines making them conservative spenders.

9. Portfolio Concentration & Recent Winners

• [24:32] The top 5-6 names form about 30–40% of the fund due to the outsized presence of Alibaba, Tencent, etc.
• Recent winners include Chinese competitors to TikTok (e.g., Bilibili, Kuaishou), travel platforms (Trip.com), and global gaming.

10. Divergence in Investor Tone: U.S. vs Rest of World

• [25:46] U.S. investors remain highly skeptical; globally, institutional appetite is driven by local economic exposure to China (e.g., Australia’s BHP, Brazil’s Vale, Asia, etc.).
  • “In the U.S., you say ‘China,’ people throw stuff at you. Going to Europe, there’s a lot of money in motion.” — Brendan Ahern [26:01]

11. Bull & Bear Case Looking to 2026

• [27:20] Bull Case:
  • Possible U.S.-China thaw under Trump, encouraging a market “re-rating.”
  • Chinese policy focused on domestic consumption, fixing overproduction (“anti-involution”) could improve corporate profitability.
  • “We’re bullish on US-China relations under President Trump… taking this trade truce and making it into a broader trade deal will allow for a re-rating of Chinese equities.” — Brendan Ahern [27:30]
• [28:40] Bear Case:
  • Continued skepticism over a catalyst for re-rating; persistent negative narratives about China’s economic collapse or Taiwan invasion.
  • Brendan calls out the statistical improbability of a Taiwan conflict, suggesting some Western fears are overblown.
  • “If I told you there’s a probability event that is 0 for 27,740 and I said, what do you think it’s going to be tomorrow, you’d say zero. But I say that, oh, no, I’m talking about China and Taiwan. You’d say, oh, it’s at least 50-50… Maybe we shouldn’t believe them.” — Brendan Ahern [28:51]

Notable Quotes & Memorable Moments

• “The stock market does not equal the economy… No place is it more true than in China.” — Michael Batnick [01:39]
• “The chapter on the Shenzhen manufacturing ecosystem is worth the price of the book.” — Brendan Ahern [03:47]
• “Literally half of the China ETFs no longer exist.” — Brendan Ahern [12:29]
• “They innovated their way out of it by making a phone that’s arguably better than an iPhone.” — Brendan Ahern [11:01]
• “If that was a US equity ETF that had that inflow… it would be the 78th largest inflow year to date…” — Brendan Ahern [14:24]
• “You basically can order restaurant delivery for free in China today because these two companies are just battling it out for market share and it’s really hurt their bottom line.” — Brendan Ahern [22:32]
• “If I told you there’s a probability event that is 0 for 27,740 and I said, what do you think it’s going to be tomorrow, you’d say zero. But I say that, oh, no, I’m talking about China and Taiwan. You’d say, oh, it’s at least 50-50… Maybe we shouldn’t believe them.” — Brendan Ahern [28:51]

Timestamps for Important Segments

• [00:53] — The “blind spot” of U.S. investors regarding China
• [03:47] — Brendan Ahern on STEM education and societal strength
• [05:53] — The 2021–2023 tech bubble and policy mistakes
• [09:02] — AI, open source innovation, and China’s AI business models
• [12:29] — ETF implosions and KWEB’s resilience
• [14:24] — The impact of currency and non-U.S. investor flows
• [15:52] — Chinese public’s perspective on AI and automation
• [18:37] — What buyers of Chinese tech are really betting on
• [22:32] — Case study: Meituan and Chinese tech company dynamics
• [26:01] — U.S. vs international institutional sentiment
• [27:30] — 2026 outlook: bull and bear case for China

Further Resources

• China Last Night newsletter (daily/weekly analysis): chinalastnight.com
• CraneShares ETFs and reports: craneshares.com

Rich in actionable insight, this episode breaks down the psychological, regulatory, and market forces shaping the “bull case” for China, while offering a nuanced view of why the West often misreads Chinese economic realities.