On December 3, the 10th Zhitong Capital Market Annual Conference was held in Nanshan, Shenzhen. Zhang Yidong, Global Chief Strategist and Co-Dean of the Economic and Financial Research Institute at Industrial Securities Co., Ltd., shared his bullish outlook titled "A Bull Market Undeterred by Storms: Patience in Going Long."
Zhang emphasized that the current era of "great power competition" forms the core logic for major asset allocation. On one hand, the U.S. relies on debt expansion to fuel market prosperity, with federal government debt exceeding 120% of GDP and facing immense annual repayment pressures. This suggests a strong need for U.S. rate cuts, with expectations of prolonged dollar weakness and further Fed easing in 2026. On the other hand, technology serves as America’s "Noah’s Ark" for sustaining long-term competitiveness—AI-related investments now contribute over 40% to real GDP growth. However, this debt-driven boom masks underlying risks, potentially forming a "rigid bubble" in AI.
In contrast, China’s property sector drag may soon bottom out, presenting a historic development opportunity. Key takeaways from Zhang’s speech:
**U.S. Hegemony’s Debt Trap and AI Dependence** The U.S. can no longer maintain its unipolar dominance. With debt-to-GDP over 120%, annual interest payments exceed $1 trillion, forcing transactional policies—domestically via monetary loosening to boost equities and externally through tariffs. The structural fragility lies in hollowed-out manufacturing (now just 8% of non-farm jobs) and reliance on services (70% of GDP) and tech.
**AI: America’s "Rigid Bubble"** Narrowly defined, four tech giants (Google, Meta, Nvidia, Microsoft) contribute 20%+ to U.S. GDP growth; broadly, AI-related investments drive ~40%. This bubble differs from 2000 or 2008—it’s in early stages (akin to 1997–98) and politically entrenched. A burst could trigger sovereign debt crises, so prolonging the tech boom is critical for U.S. hegemony.
**China’s Turning Point: From Debt-Driven to Equity-Fueled Growth** China’s transition from property-led expansion to high-quality development mirrors Japan’s post-1998 reforms. Key shifts: - **Central Balance Sheet Leverage**: At 26% debt-to-GDP (vs. U.S.’s 120%), China retains policy firepower. Central Huijin’s ETF holdings surged from 5–8% pre-2023 to 37% in 2025, echoing BOJ-style market support. - **Local Governments Pivot**: From land finance to "equity finance," exemplified by Hefei’s model of asset securitization. - **Household Wealth Effects**: A-shares’ 4% dividend yield (6% for H-shares) outpaces bonds (1.8%), driving reallocation.
**Two Investment Themes for 2026**: 1. **Growth (Tech & New Consumption)**: - AI ecosystem (semiconductors, infrastructure, applications like gaming/fintech). - Frontier tech (quantum computing, photonic chips) aligned with China’s 15th Five-Year Plan. - New consumption (services post-$12k GDP/capita). 2. **Value (Deep Value + Cyclical Recovery)**: - High-dividend sectors (HK insurers, energy, Macau gaming). - Strategic assets (gold, rare earths). - Traditional industrials (steel, chemicals) benefiting from supply-side reforms.
**Macro Tailwinds**: - **Fed Easing**: Weak dollar (USD/CNY potentially sub-7) and possible QE/YCC under a Trump-appointed Fed chair. - **Foreign Capital Return**: ETF inflows and short-covering in Q1 2026, especially into tech.
**Conclusion**: Ignore short-term noise. Focus on structural shifts—China’s equity market is poised for a Japan-style long bull run, driven by asset revitalization and tech ascendancy. Patience in accumulating growth and value stocks will pay dividends.
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