As geopolitical conflicts intensify, Chinese assets are becoming a "safe haven"! Just as a "two-week ceasefire" was announced in the Middle East, Israel and Lebanon erupted into conflict. The U.S.-Iran talks in Islamabad, Pakistan, concluded on April 12 without an agreement. The U.S. threatened to block the Strait of Hormuz, while the Iranian military declared the strait under its control. The first round of U.S.-Iran negotiations yielded no breakthrough, with tensions over the Strait of Hormuz continuing to escalate, and the prospects for the next round of talks remain uncertain. Against this backdrop of stalled negotiations, global markets are gradually realizing that this conflict may no longer be a short-term event but a medium-to-long-term shock that reshapes global energy and supply chain dynamics. From the current situation, markets are increasingly aware that disruptions to shipping routes in the Strait of Hormuz are unlikely to be resolved quickly. Consequently, the feared chain reaction—"supply chain shock → soaring oil prices → rising inflation → higher interest rates → increased financial market volatility"—is becoming a reality. In the past, rising oil prices were often seen as a "risk premium" bet by traders. Now, the situation is different: the number of oil tankers passing through the strait has halved, reflecting a tangible "supply gap." The logic of global asset pricing has shifted. Over the past decade, markets focused on Federal Reserve rate hikes and liquidity. In the coming years, attention will turn to "supply constraints" and "geopolitical security." This means that while financial asset prices were previously judged primarily from an economic and financial perspective, future price movements will be determined by stability amid geopolitical shocks. In this great transformation, one player is being "rediscovered" by the market—Chinese assets, which are familiar to many. How have foreign investors traditionally viewed them? Either as "growth stocks" or "cyclical stocks." But now, Chinese assets are increasingly understood as carrying a "safety premium." Why? The confidence stems from two key factors. First, China's energy foundation is stable. Although China imports oil, its situation is entirely different from that of Japan and South Korea. For Japan and South Korea, "without oil, they cannot function," as their power generation relies heavily on oil and gas. In contrast, China's energy mix is dominated by coal, with renewables leading the way, while oil and gas account for only a small percentage of power generation. What does this mean? In extreme scenarios, when others face blackouts and production halts due to oil shortages, China has the capacity to maintain industrial operations. This is what we have long referred to as "supply chain resilience." Moreover, China has contingency plans. Coal chemical technology can convert coal into chemical products, partially substituting for crude oil. With new energy vehicles becoming increasingly common, transportation's reliance on crude oil is also declining. Second, China possesses a comprehensive industrial foundation. Global supply chains are highly fragile, but China is the only country with all industrial categories recognized by the United Nations. When other parts of the world halt production due to component shortages or face soaring costs from energy issues, China has alternatives. This "ability to sustain continuous production" is the most scarce resource in the current environment. Thus, the current logic reflects a "redistribution" of global manufacturing. For economies like Japan and South Korea, which are highly dependent on oil, high oil prices act as profit destroyers. But for China, they could serve as a "catalyst for industrial relocation." In times of shock, capital flows to where there is greater safety. In the short term, markets may remain volatile due to concerns. However, from a medium-term perspective, China's PPI broke free from 41 consecutive months of weakness in March, achieving positive growth, indicating that corporate profit margins are steadily improving. In the long run, once foreign investors recognize China as a "stability anchor" in a turbulent world, a true revaluation of its asset pricing framework will occur. In summary, when uncertainty becomes the norm, stability is the most expensive luxury. The current revaluation of Chinese assets is not merely a rebound but a "return to value" amid a shift in global order.
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