China’s AI IPO boom is surging, but foreign investors face high barriers

China’s artificial-intelligence-linked initial public offerings are delivering explosive gains, but overseas investors are finding it difficult to gain direct access to the rally.

Shares of mainland chipmakers MetaX Integrated Circuits and Moore Threads surged sharply on their market debuts this month, with gains running into the hundreds of percent. The strong performances have fuelled enthusiasm among domestic investors, particularly for listings on Shanghai’s tech-focused STAR Market.

Foreign retail investors, however, are largely shut out of mainland IPOs. Opening an onshore brokerage account requires a Chinese bank account and proof of residence or long-term visa status, along with other eligibility requirements that make participation impractical for most overseas individuals.

China’s official rules allow only a narrow group of foreigners, such as permanent residents, employees working in China, or individuals with equity incentives at mainland-listed firms, to open A-share trading accounts directly.

For many global investors, the Stock Connect programme is the main route to Chinese equities, enabling overseas investors to buy mainland stocks via Hong Kong brokers. But newly listed shares are typically excluded from the scheme for weeks or months after their debut, limiting access to fast-rising IPOs.

As a result, foreign retail exposure to China’s AI IPO boom is mostly indirect. Some overseas investors gain limited access through offshore funds that invest in A-shares and participate in IPO allocations, though those positions are often small relative to the funds’ overall size.

Direct participation is largely reserved for large institutions through China’s Qualified Foreign Institutional Investor framework, which allows approved global asset managers, banks and sovereign funds to invest in onshore stocks, including IPOs. The programme, however, is not open to individual investors and involves regulatory approval and foreign-exchange registration.

The divergence in access comes as China’s tech sector continues to outperform. The CSI 300 Information Technology Index is up more than 30% this year, outpacing broader mainland and Hong Kong equity benchmarks.

For now, China’s AI IPO surge remains a domestic-led phenomenon, highlighting the sharp divide between booming local participation and the hurdles still facing foreign investors seeking a seat at the table.