Goldman Sachs believes that in the current environment of persistently high global macroeconomic uncertainty, Chinese assets are forming a quantifiable "stability premium" due to their low volatility, predictable policies, and dividends from structural transformation. For investors seeking portfolio hedging attributes, the defensive value of Chinese government bonds and RMB-denominated assets warrants re-examination. Structural beneficiaries include the "new three" sectors in the export chain—new energy—along with manufacturing and producer services that benefit from industrial upgrading.
While global markets experience sharp fluctuations under the dual pressures of Middle East conflicts and soaring energy prices, Chinese assets have demonstrated remarkable stability. Goldman Sachs argues that this stability itself is becoming a premium worthy of pricing.
In a report released on April 24, Goldman Sachs summarized China's stability into three key areas: stable growth, a stable market, and stable policies.
Amid ongoing global macroeconomic uncertainties, the low volatility of Chinese assets, policy predictability, and benefits from structural transformation are creating a measurable stability premium. Investors looking for safe-haven characteristics in their portfolios should reconsider the defensive value of Chinese sovereign bonds and RMB assets. The "new three" export categories in new energy, as well as manufacturing and producer services boosted by industrial upgrading, represent key structural opportunities.
The performance of the RMB and interest rates has been notably divergent. China's financial markets have shown significant resilience against external shocks. Since late February, while most emerging market currencies in Asia and Europe depreciated sharply due to deteriorating trade terms, the RMB has not only appreciated against the US dollar but has also outperformed the dollar on a trade-weighted basis.
Interest rates have also moved against the trend. Yields on 10-year government bonds in the US, Germany, and Japan have risen by approximately 30 basis points since late February, whereas China's 10-year government bond yield has decreased by 5 basis points over the same period.
Goldman Sachs suggests this low volatility is not coincidental but rooted in institutional frameworks. The central bank actively suppresses fluctuations through daily midpoint management and liquidity tools, representing a mature and consistent operational framework.
Market stability is further supported by three favorable initial conditions: first, the Chinese government had accumulated substantial oil reserves in advance; second, the RMB was already on an appreciation trend against the US dollar before the outbreak of conflict involving Iran; third, China's inflation remains extremely low, with the PPI turning positive year-on-year in March 2026 for the first time since 2022. Slightly higher inflation is beneficial for China, but currently, only 30% of PPI sub-categories show positive year-on-year growth, indicating that policy pressure remains distant.
On the economic data front, China's official real GDP grew by 5.0% year-on-year in the first quarter of 2026, matching the full-year growth rate for 2025 and exceeding market consensus expectations.
Exports were the standout driver. Dollar-denominated exports surged by 14.7% year-on-year in the first quarter, contributing approximately 3 percentage points to the 5.0% GDP growth according to preliminary estimates. Particularly noteworthy are the "new three" export categories—solar cells, lithium batteries, and electric vehicles—which saw export growth soar by 72% year-on-year in March, up from 55% in January-February, far outpacing overall export performance.
The ongoing closure of the Strait of Hormuz has significantly elevated global energy prices. However, Goldman Sachs identifies three key hedging pathways for China in the face of high oil prices:
First, amid global energy supply shocks, the competitive advantage of China's new energy products will become more apparent, with overseas sales of Chinese electric vehicles already surging in March. Second, missile and drone attacks have led to shutdowns of aluminum producers in the Middle East, creating opportunities for Chinese aluminum exports to fill the gap, with similar dynamics for petrochemical products. Third, policymakers can accelerate infrastructure investment—the March legislative sessions approved funding arrangements including "new financing tools" and bank capital injections, along with 109 major projects under the 15th Five-Year Plan, providing ample policy ammunition for accelerated infrastructure development.
Looking ahead, Goldman Sachs expects China's economic structural transformation from construction and real estate toward manufacturing and leasing/commercial services to deepen further.
Over the past two years, these sectors have shown clear divergent trends in their share of GDP, with the 15th Five-Year Plan further emphasizing deep integration of technological and industrial innovation. Policy support for producer services (technology, logistics, software, and information services) is no less significant than for consumer services.
This structural shift, combined with China's expanding trade surplus, underpins Goldman Sachs' positive outlook for the RMB.
However, policymakers will actively manage the pace of appreciation—aiming to prevent one-way expectations from triggering capital flow risks while avoiding excessive pressure on exporters from rapid appreciation. The direction for the RMB is clear, but the path will depend on the evolution of geopolitical events, as evidenced by the dollar's temporary strength during recent escalations of Middle East tensions and rising oil prices.
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