This year marks the beginning of China's 15th Five-Year Plan period, with the plan outline recently approved during the Two Sessions. The plan highlights technology innovation industries and future industries as key areas for attention. Last year's strong performance of technology stocks reflected significant capital interest in innovation-driven sectors. Technology is expected to remain a primary investment theme this year. Investors can consider positioning around key areas emphasized in the 15th Five-Year Plan, including humanoid robots, semiconductors, computing power and algorithms, power grid equipment, controlled nuclear fusion, quantum technology, commercial aerospace, and biomedicine.
The chairman of the China Securities Regulatory Commission stated at a recent press conference that the total market capitalization of A-shares now exceeds 110 trillion yuan, with over 5,400 listed companies generating annual revenues surpassing half of China's GDP. Within the沪深300 index, strategic emerging industries now account for a 45% weighting, indicating a growing momentum towards high-quality, innovative development. Holdings of A-share circulating market capitalization by medium to long-term investors, such as mutual funds, social security funds, insurance companies, and annuities, have increased by more than 50%.
Further reforms for the ChiNext board were announced, aimed at supporting more technology innovation companies to go public by easing listing criteria and creating a green channel. These measures robustly support the development of new quality productive forces, align with current economic transformation needs, and enhance the capital market's capacity to bolster the real economy. While many traditional industries face operational challenges and slowing growth during the current economic transition, emerging industries are flourishing, attracting substantial capital inflows.
The ongoing fourth technological revolution, characterized by artificial intelligence, is seeing comprehensive implementation of "AI+" initiatives. AI-related industries are developing rapidly. China holds world-leading advantages in several areas, including large language models, AI applications, and humanoid robots. Coupled with the world's largest population and consumer market, China can leverage its scale to actively promote "AI+" applications, generating significant economic output and driving development.
In recent years, the U.S. AI technology sector experienced substantial gains and record-high valuations, but signs of a valuation bubble emerged this year, leading to increased volatility and divergent views. In contrast, China's technology sector still presents considerable investment opportunities in 2026, albeit with likely differentiation. Stocks of companies achieving genuine technological breakthroughs with strong R&D capabilities may continue to perform well, while those reliant on speculative themes could see significant declines. Therefore, investment in tech stocks this year requires a return to fundamental analysis. Long-term, technological innovation remains a critical development direction.
Beyond the technology sector, resource stocks also hold significant potential this year. Opportunities exist in companies related to non-ferrous metals, oil, coal chemicals, and power—sectors less susceptible to AI disruption.
The government work report prioritized "building a strong domestic market" as the top task for the year, with special actions to boost consumption highlighted prominently. This marks the second consecutive year that expanding domestic demand has been listed as the primary task. Consumption is a main engine of economic growth, and how to expand domestic demand, stimulate consumption, and address the "strong supply, weak demand" dynamic were hot topics at the Two Sessions, focusing on enabling and encouraging public spending.
This year, a new round of state subsidies has been allocated, and a series of concrete measures to promote consumption have been implemented. A recent press conference indicated that the focus of 2026 macro-policy will be on strengthening the domestic cycle and comprehensively expanding domestic demand. Relevant departments will formulate an implementation plan for the 2026-2030 strategy to expand domestic demand, aiming for mutual promotion between supply and demand and an upgraded economic cycle. The issuance of 250 billion yuan in special government bonds is planned to promote consumer goods trade-ins and further stimulate consumption growth.
A crucial aspect of boosting consumption is the vigorous development of the capital markets. A sustained, steady bull market can effectively increase household property income, thereby enhancing willingness and ability to consume, playing a positive role in stimulating spending. China's capital market has now embarked on such a steady, long-term bull run with a good start. All sectors of society should nurture this hard-won trend, improve investor returns, and allow the public to gain property income through stocks or funds, which is a vital channel for driving consumption.
Efforts to stimulate investment will also continue this year. Fiscal policy is expected to be more proactive and effective, driving investment growth through large-scale projects like the Yalong River hydropower project and the new Tibet-Xinjiang railway. The combined force of investment and consumption will effectively boost domestic demand, crucial for stabilizing the economic foundation.
The technology innovation and future industries emphasized in the 15th Five-Year Plan are set to receive strong policy support over the next five years and are expected to perform well in 2026. However, investing in tech stocks this year presents increased challenges, primarily because many stocks saw significant gains last year and now face substantial profit-taking pressure, making them vulnerable to adjustments on any negative news. Recent volatility in crude oil prices due to escalating Middle East tensions attracted heavy capital inflow into the oil and gas sector, causing sharp price increases followed by significant pullbacks, illustrating the volatility of event-driven price movements. Investors must be cautious of risks and avoid buying at peaks. This volatility also contributed to substantial declines in the technology sector recently. Should tensions in the Middle East show signs of easing, perhaps if the U.S. administration seeks disengagement due to domestic pressure, the technology sector could resume its upward trajectory and lead the market.
Humanoid robotics represent China's fourth major industrial track, following home appliances, mobile phones, and new energy vehicles. The prospects for this sector have been viewed positively since early last year, and the板块 experienced considerable gains. After a deep correction following the Spring Festival, the sector now shows signs of bottoming out based on the duration and extent of the adjustment, with recent increased activity. As Middle East conflicts potentially ease, the market is expected to move beyond event-driven shocks and follow its own rhythm. Technology and resource stocks that genuinely represent the direction of economic transformation remain valuable for allocation, and their market performance is anticipated to gradually improve.
The government work report indicated continued implementation of a proactive fiscal policy, with a proposed deficit-to-GDP ratio of around 4%, a deficit size of 5.89 trillion yuan (an increase of 230 billion yuan from the previous year), plans to issue 1.3 trillion yuan in ultra-long-term special bonds to support key national projects and new initiatives, and 300 billion yuan in special bonds to replenish the capital of large state-owned commercial banks. These measures will effectively stabilize the economic foundation and boost growth.
Household deposits in China have exceeded 165 trillion yuan, with 50 trillion yuan in time deposits maturing this year. Faced with declining deposit rates, these maturing funds may seek higher-yielding products. While some risk-averse investors may opt for bank deposits, wealth management products, or bonds, others with higher risk tolerance are likely to enter the capital market as it strengthens. Channels for public market participation include direct stock investment and fund purchases. Sales of funds, particularly equity funds, are expected to continue recovering this year, providing a steady stream of incremental capital for the ongoing steady bull market.
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