Global capital has not exited; it has merely changed its posture to dig deeper.
The truth behind Temasek's reduced China allocation to 18%: a misinterpreted "withdrawal," an underestimated gamble, and behind the declining ratio is an additional investment of 4 billion Singapore dollars in real cash. In the skyscrapers of Singapore's Marina Bay Financial District, Temasek Holdings has just delivered a record performance report: the net asset value of its investment portfolio for the fiscal year 2025 reached 434 billion Singapore dollars (approximately 2.35 trillion RMB), an increase of 45 billion Singapore dollars from the previous year, setting a historical high. However, one number in this impressive financial report has stirred waves in the Chinese market: based on the location of assets, Temasek's investment ratio in China has dropped to 18%, further widening the gap with the Americas (24%). Suddenly, the narrative of "Temasek withdrawing from China" became rampant. "Whether it's 18% or 19%, Temasek remains optimistic about China in the long term and has a strong position in China; nothing has changed," said Wu Yibing, Chairman of Temasek China, firmly to a Caijing reporter. He presented a counterintuitive fact: in the fiscal year 2025, Temasek's absolute net investment portfolio in China grew by about 4 billion Singapore dollars (approximately 21.6 billion RMB). This decline in ratio is more about the denominator's inflation effect brought by the bull market in U.S. stocks and the rebalancing of Temasek's global asset allocation. When the market is blinded by percentages, smart capital has already seen through the essence.
1. The Myth of Ratios
The misinterpreted "withdrawal signal" in Temasek's fiscal year 2025 report is like a prism, reflecting the complex spectrum of global capital flows.
The financial report shows that its investment in Singapore remains stable at 27%, the Americas has risen to 24%, India has increased to 8%, while China has decreased by 1 percentage point to 18%. There are hidden intricacies behind these numbers.
From a historical perspective, Temasek's investment ratio in China has indeed followed a parabolic trajectory: entering the Chinese market in 2004, it peaked at 29% in the fiscal year 2020, and then gradually fell back to 18% over the next five years. This curve is often simply interpreted as a "withdrawal roadmap."
However, Wu Yibing provided a completely different coordinate system: "It is significantly overweight relative to any global index." A careful breakdown of the financial report data reveals that the net asset value of Chinese assets was approximately 440.8 billion RMB in the fiscal year 2020 and 423 billion RMB in the fiscal year 2025, a slight decrease of only 4.03% over five years. During the same period, the MSCI China Index fell nearly 30%, while the S&P 500 Index in the U.S. rose over 40%. The change in ratio is more due to the dramatic fluctuations on the denominator side rather than an active contraction on the numerator side.
The structure of Temasek's investment portfolio reveals a key truth: 49% consists of non-listed assets, valued at cost rather than market value; the fund investment portion experiences a performance lag of 4-6 quarters. This means that the current financial report's Chinese allocation actually reflects investment decisions made two years ago. "We are bottom-up investors, focusing more on the resilience of the companies themselves," Wu Yibing's statement exposes the superficiality of Wall Street's "percentage narrative."
- Strategic Shift
From Scale Preference to Value Hunting, Temasek completed a remarkable tactical turnaround in the fiscal year 2025: shifting from a net sell of 7 billion Singapore dollars to a net investment of 10 billion Singapore dollars (approximately 54 billion RMB), marking the largest scale in twenty years. This flexibility cleverly echoes the annual report's theme of "flexible response."
On the global chessboard, Temasek is making precise moves. The Americas allocation has expanded to 24%, partly due to a gamble on artificial intelligence infrastructure. Temasek is participating in the AI Infrastructure Partners (AIP) program initiated by Microsoft and BlackRock, which aims to raise 30 billion dollars to leverage investments in the hundreds of billions. "This reflects our focus on significant future transformations," pointed out Ravi Lamba, the strategic planning director. India has become a new favorite, with an 8% allocation nearly double that of five years ago. Temasek's Managing Director for India, Vishesha Shariwasta, candidly stated that India is "relatively unaffected by geopolitical issues against a backdrop of strong domestic consumption."
In its billion-dollar investment plan, consumer healthcare targets such as Haldiram snack company and Manipal Healthcare Group have become key bets. In the Chinese market, the investment logic has undergone profound evolution. Temasek has established a RMB private equity platform in Shanghai through Taiming Capital, with the first fund focusing on early investments in life sciences. This move is intriguing, capturing innovative sprouts through localized funds while avoiding geopolitical fluctuations. "Temasek's partners hope to explore the Chinese market together," revealed Shen Ye, Vice President of Temasek China. This "co-investment" model is essentially a clever risk-sharing mechanism.
In the consumer sector, Temasek increased its stake in Yum China for the fiscal year 2025, viewing it as a model for the "rise of Chinese chain consumer brands." From Mixue Ice City to Luckin Coffee, local brands in China are completing a leap from cost-performance weapons to value recognition. "Local brands that meet the needs of Chinese consumers are on the rise," Shen Ye anticipates that this trend will continue.
- The China Bet
A dual gamble on AI applications and decarbonization. As international capital withdraws from China due to policy uncertainties, Temasek sees undervalued opportunities in the market.
"The systemic reforms in China over the past two years have been underestimated by the capital market," Wu Yibing stated directly. He specifically pointed out that the regulatory framework of "one bank, one bureau, one committee" reflects the highest level's emphasis on the capital market. Signs of consumer recovery are beginning to emerge. In May 2025, China's total retail sales of consumer goods grew by 6.4% year-on-year, exceeding market expectations. However, Wu Yibing is keenly aware that "the restoration of consumer confidence is a gradual process," especially as "the wealth effect is most visibly reflected," with the stability of the stock and real estate markets becoming key variables. Temasek's China bet focuses on two main tracks. The application of artificial intelligence is placed at a strategic high position.
"China has the most data and AI talent, and applications may accelerate," Shen Ye's judgment aligns with the "2025 China Artificial Intelligence Application Development Report": China's intelligent computing power reached 1037.3 EFLOPS, growing by 43% annually, and the decision-making intelligence coverage of AI in the financial sector has reached 65%.
Wu Yibing pointed out more sharply: "What everyone sees today, like ChatGPT or DeepSeek, is just the 'elementary school level application' of AI," and "the reason U.S. stocks have risen so much is that AI will enhance labor productivity across all industries." Temasek is focused on the penetration potential at the industrial end in China, where the manufacturing industry has compressed the new car development cycle from 24 months to 14 months through generative design. The sustainable living track has gathered a heavy investment of 46 billion Singapore dollars, accounting for 11% of the portfolio.
In the face of global decarbonization slowdown signs, Wu Yibing asserted: "China will not waver in its commitment to carbon neutrality," as photovoltaic and wind power are directly related to energy security, and China has already achieved profitable decarbonization. For photovoltaic and new energy vehicle companies that are deeply in the red, he proposed a shocking viewpoint: "Competition is not a bad thing," and the real enemy is "over-competition with subsidies." This profound understanding of the competitive philosophy in the Chinese market is precisely the cognitive blind spot that Western investors are most likely to misinterpret.
- The Eye of the Storm
The art of survival in the fog of geopolitics. Coface's June 2025 risk report paints a dramatic picture: the global economy "swings between slowdown and risk escalation," with risk ratings for 23 industries and 4 countries downgraded, and growth potentially falling below 2%.
In this "new normal of uncertainty," Temasek's "flexible response" strategy is even more precious. The threat of Trump's tariff policy looms. Although currently in a 90-day pause, once restarted, 75% of Canada's exports to the U.S. will be severely impacted, and tariffs on automotive metals may soar by 50%. Temasek's allocation of 24% in the Americas and 18% in China represents a delicate balance, akin to walking a tightrope over a tariff volcano. The Middle East powder keg affects energy nerves.
Coface warns: if the Strait of Hormuz is blocked, oil prices could soar above 100 dollars per barrel; however, if OPEC+ increases production alongside weak demand, prices may fall back to the 65-75 dollar range.
Temasek's bets on renewable energy platforms like Neoen are a hedging strategy against this "walking on thin ice" situation. The differentiation in emerging markets is intensifying: Argentina is expected to grow by 5% thanks to "Milei economics," while Mexico may see zero growth due to trade shocks, and India's seemingly bright surface hides a slowdown in consumption. In this context, Temasek's 8% allocation in India and 18% in China form a subtle complement, with the former betting on domestic demand resilience and the latter on industrial upgrades.
"We will not exit just because a fund matures." The Temasek India team's statement regarding their investment in Zomato reveals their confidence in navigating through cycles. This long-termism is precisely the ballast against geopolitical storms.
In July 2025, Temasek signed an investment agreement in Mumbai, India, planning to invest 10 billion dollars in India over three years; meanwhile, the Taiming private equity fund team in Shanghai is screening early-stage life sciences projects. These two scenes form a brilliant metaphor for globalized investment. Wu Yibing and his team deeply understand the essence of capital arithmetic: when 18% corresponds to an absolute value of 423 billion RMB, and there is a continuous injection of 4 billion Singapore dollars each year, this far exceeds the technical level of asset allocation, directly pointing to a vote of confidence in the country's transformation.
"All of Temasek's invested companies are trying AI applications," Shen Ye's observation reveals the true pulse of the Chinese economy. When international attention is occupied by overcapacity and weak consumption, Temasek sees logistics robots with a 98% automated sorting rate in Shenzhen warehouses, new car development cycles compressed by 10 months in automotive R&D centers, and market survivors in photovoltaic factories that have escaped subsidies.
Global capital has not exited; it has merely changed its posture to dig deeper.
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