As 2025 draws to a close and we look ahead to 2026, China's macroeconomic landscape is expected to remain stable with steady progress. With pro-growth policies gradually taking effect, economic data is projected to improve in 2026, potentially extending the current gradual bull market and generating stronger wealth effects. This would allow more investors to earn asset-based income through capital markets, boosting retail sales recovery. As domestic demand grows, inflation is likely to rise gradually, with CPI maintaining positive growth and PPI transitioning from negative to positive territory. This reflects policymakers' heightened efforts to counter weak demand, including more proactive fiscal measures in 2026 to stimulate investment and consumption, stabilizing prices and economic growth. Despite external uncertainties and potential trade friction recurrences, confidence remains strong—optimizing export structures and enhancing value-added products could drive profit growth amid slowing export expansion.
Since September 24, 2024, China's equity market has rallied on a policy package supporting risk assets, cementing this slow-but-sustained bull run. In 2025, the Shanghai Composite Index briefly surpassed 4,000 points, reinforcing the trend. The market rebound has attracted significant inflows, with mutual fund issuance exceeding ¥1 trillion in 2025—marking seven consecutive years at this level. Notably, equity funds accounted for over 50% of new issuances, replacing fixed-income products as the dominant force. This signals an accelerating shift of household savings into capital markets in 2026, via direct investments or fund purchases, as asset allocation pivots from real estate. With property market expectations fundamentally altered, regulators emphasize deepening reforms to strengthen capital markets, ensuring fairness for over 200 million investors and 700 million citizens.
This bull market carries three critical missions: First, increasing household asset income to spur consumption; second, enabling wealth appreciation that may indirectly stabilize the housing market; third, fostering innovation by supporting tech firms’ listings, cultivating unicorns and industrial giants to drive economic transformation. Thus, this bull run acts as a "fourth carriage" elevating economic quality, poised to sustain its impact in 2026.
Tech stocks dominated 2025, and the sector is expected to remain a core theme in 2026, with "AI+" creating cross-industry opportunities. Compared to the U.S. "Magnificent Seven," China’s top ten tech firms’ combined $2.5 trillion valuation suggests room for growth without systemic bubbles. Valuations should account for technological breakthroughs and order wins rather than traditional metrics. Robotics, as a prime AI-consumer application, may transition from conceptual hype in 2025 to order-driven performance in 2026, with量产-driven profitability tests by 2027. Long-term tech investing must stay value-focused.
Gold is projected to extend its rally in 2026, underpinned by dollar supply expansion and U.S. debt concerns. The PBOC’s 13-month gold-buying spree aims to bolster RMB credibility for internationalization. After 2025’s surge to ~$4,400/oz and subsequent consolidation above $4,000, further Fed rate cuts could support prices. A potential dovish Fed chair appointment under Trump may sustain gold’s appeal.
Beyond tech, high-dividend bank stocks hit record highs in 2025, benefiting from risk-averse capital reallocation. Their outperformance, critical to the index’s 4,000-point breakthrough, signals savings migration. In 2026, dividend plays and rotational sector gains may broaden the rally from structural to market-wide, amplifying wealth effects for a prolonged bull run.
(Author: Former Chief Economist and Fund Manager at Qianhai Kaiyuan Fund)
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