At the 22nd China International Finance Forum held in Shanghai on December 19-20, Liu Xiaoshu, Chief Economist of Bank of Qingdao, delivered a keynote speech on building an intelligent financial ecosystem in the digital economy era.
Liu expressed optimism about the current and future capital markets, citing two key cyclical perspectives:
1. **Kondratiev Wave Cycle**: Liu noted historical patterns in major indices, such as the Dow Jones Industrial Average, which consolidated for over a decade near 1,000 points after first breaching the level in 1972, and later near 10,000 points post-1999 before resuming upward momentum. Similarly, China’s SSE Composite Index has oscillated around the 3,000-point mark for 17.5 years since 2007.
He attributed these trends to structural economic shifts driven by Kondratiev cycles, emphasizing that troughs in 1974 and 2009 preceded sustained bull markets. "With new productive forces, particularly advancements in high-quality productivity, the SSE Composite could stabilize above 4,000 and eventually surpass 5,000," Liu asserted.
2. **Juglar Cycle**: Liu highlighted China’s entry into a new Juglar cycle in 2025, with 2024 as an inflection point. Key indicators include: - **ROIC Recovery**: Listed manufacturing firms’ return on invested capital bottomed in 2024 and has since rebounded consecutively through Q3 2025. - **Capital Expenditure Growth**: Advanced manufacturing sectors saw capex turn positive by Q3 2025, while traditional industries are narrowing declines.
"These signals confirm a new Juglar cycle, justifying optimism for 2025–2026 market performance," Liu stated, drawing parallels to 2016–2017 trends. He suggested 2017 as a benchmark for equity and fixed-income investments in 2026.
Liu’s analysis underscores structural economic evolution as the driver of long-term market gains, with cyclical tailwinds supporting further upside.
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