In 2026, we seek certainty amidst challenges. What are the prospects for global economic growth? What new trends are emerging in the Chinese economy? Will the Federal Reserve aggressively cut interest rates? How will China's monetary policy continue its moderately loose stance? How will fiscal policy promote income growth for residents? Will gold continue to reach new highs? Will the RMB continue to appreciate? Can the risks in the real estate market be cleared? Will the AI bubble in US stocks burst? Can the A-share market hold above 4000 points? Can technology stocks continue to drive the market?
Article by: Su Manyi and Lin Jiechen
Source: CBN (China Business Network)
In 2025, the global economy will seek a new balance amidst fluctuations.
In 2026, we seek certainty amidst challenges. What are the prospects for global economic growth? What new trends are emerging in the Chinese economy? Will the Federal Reserve aggressively cut interest rates? How will China's monetary policy continue its moderately loose stance? How will fiscal policy promote income growth for residents? Will gold continue to reach new highs? Will the RMB continue to appreciate? Can the risks in the real estate market be cleared? Will the AI bubble in US stocks burst? Can the A-share market hold above 4000 points? Can technology stocks continue to drive the market?
As the year draws to a close, challenges remain.
With these questions in mind, CBN (China Business Network) has partnered with ten "Chief Economists of the Year" to provide you with predictions for 2026.
worldwide
Chief Economist, Head of Research Department, and Dean of CICC Research Institute at CICC
CBN: What are the prospects for global economic growth in 2026, and what new trends are emerging in the Chinese economy?
Peng Wensheng: Geopolitical competition is increasingly becoming a focal point influencing the global economy and markets, encompassing not only traditional trade and economics but also competition in innovative fields such as artificial intelligence. Resource endowment, economies of scale, and transaction costs are the three determinants of international trade and global industrial chains. Among these, resource endowment is related to the traditional understanding of comparative advantage (labor-intensive, capital-intensive, natural resources); transaction costs include transportation costs, tariffs, and non-tariff protectionist measures; and China's economies of scale are a significant factor in the impact of US tariffs.
Under the new geopolitical situation, the dual circulation strategy, with the domestic circulation as the mainstay and the domestic and external circulations mutually reinforcing each other, is showing some new trends. On the domestic circulation side, the situation of improved supply and weak demand in the real economy continues, but the stock market has risen significantly, mainly due to a decline in risk premiums. In the second half of the financial cycle, deleveraging has led to excess savings, with funds shifting towards risk assets driven by improved market expectations. On the other hand, recent data shows that a new closed-loop model for the external circulation is beginning to emerge. In the past, China exported consumer goods to the United States, and the corresponding foreign assets were formed through holding US Treasury bonds. The new trend is that China exports capital goods and intermediate goods to emerging markets and Belt and Road countries for local investment, and the corresponding foreign assets are formed through bank loans, corporate overseas investments, etc. The US tariff increases in 2025 will accelerate this change.
Two key elements for achieving mutually reinforcing internal and external cycles are innovative development and boosting domestic demand, to fully leverage China's economies of scale. DeepSeek's breakthrough is one of the triggers for the market to reassess China's innovation capabilities, increasing investor risk appetite. The law of scale means that AI large-scale model development is currently in a phase of diminishing returns to scale; whether AI applications can bring about broader increasing returns to scale is crucial for future development. Regarding innovative development, China needs to place greater emphasis on demand. Boosting consumer demand not only promotes macroeconomic balance but also improves the market environment for technological and industrial innovation. Fiscal expansion can play a key role; an effective approach is to alleviate debt burdens. Increased central government debt can help local governments reduce their debt burdens. Fiscal expansion can also directly impact consumer demand, particularly fiscal spending focused on issues related to people's livelihoods such as childbirth, child rearing, and education, including improving social security for low-income groups. Historical experience shows that technological progress both increases the necessity of improving social security and provides the resources for it. The latter is macroscopically reflected in an oversupply of aggregate supply relative to aggregate demand; fiscal expansion to improve social security for low-income groups utilizes these resources.
Morgan Stanley's Chief Economist for China
CBN: With Powell's term nearing its end, will the Federal Reserve aggressively cut interest rates? How many rate cuts are expected from the Fed next year?
Xing Ziqiang: In 2025, the downside risks to the US job market intensified, and the Federal Reserve has cumulatively cut interest rates by 75 basis points since September. We expect that as the labor market cools further in early 2026, the Federal Reserve will cut interest rates by 25 basis points each at its January and April meetings, totaling 50 basis points, ultimately lowering the target range for the federal funds rate to 3.00%–3.25%.
However, similar to the complexity of the current economic situation, there are also divisions within the Federal Reserve. Hawkish members are concerned about moderate economic growth, strong AI-related capital spending, and high asset market activity, believing that further monetary easing is unnecessary at present; dovish members, on the other hand, are more concerned about weak labor demand and slowing consumption growth, advocating for lowering interest rates to a neutral level as soon as possible.
Our baseline scenario for the U.S. economy shows that the Federal Reserve's dual mandate is facing dual pressures. On the one hand, tariffs are pushing up commodity prices, and inflation is expected to remain above the 2% policy target until 2027, requiring the Fed to remain vigilant about inflation. On the other hand, since May 2025, job growth has slowed significantly, and the labor market faces downside risks.
How will the Federal Reserve weigh its options? Previously, we expected the Fed to prioritize curbing inflation for a longer period before initiating rate cuts, ultimately leading to lower interest rates. However, the actual path shows that the Fed has already cut rates ahead of schedule based on employment risks, and currently, inflation and employment risks are approaching equilibrium. Subsequent policy paths will heavily depend on economic data performance.
We believe the job market will remain weak as the corporate sector continues to pass on tariff costs. The US unemployment rate will continue to rise, peaking at 4.7% in the second quarter of 2026, while tariffs will temporarily push up inflation. Based on this assessment, we expect interest rate cuts of 25 basis points each in January and April 2026, ultimately locking the policy rate target range at 3.0%–3.25%.
Chief Global Economist of BOC Securities
CBN: Markets expect the Federal Reserve to adopt a dovish stance and cut interest rates next year. What will be the trend of the US dollar? What will happen to the RMB exchange rate?
Guan Tao: If the Federal Reserve further cuts interest rates significantly and US government policies further widen the cracks in the dollar's credibility, the dollar index (i.e., the dollar exchange rate) may continue its weak adjustment next year. However, the sharp drop in the dollar index this year has largely priced in various negative factors. The following three factors may make the dollar index less weak than expected next year: First, the market may have overestimated the impact of the multipolarization of the international monetary system, because the biggest beneficiary in this round is gold, and gold trading is mainly denominated and settled in US dollars; second, the market may have underestimated the Federal Reserve's determination to defend its independence, especially given the possibility of a rebound in US economic growth next year and the return of "American exceptionalism"; third, the market needs to be wary of the return of the dollar's safe-haven role, because the center of global trade frictions may no longer be the United States next year.
China's economic recovery, trade surplus, and the depreciation of the US dollar and the ongoing US-China trade truce may continue to benefit the RMB exchange rate next year. However, caution is advised regarding a new cycle, as the US dollar index may not be as weak as anticipated, China's external demand environment remains highly uncertain, and domestic efforts to maintain stability in four key areas will require significant effort. Currently, factors influencing the RMB exchange rate are simultaneously present; when positive factors dominate, the RMB appreciates; when negative factors dominate, the RMB depreciates. The Central Economic Work Conference communique has emphasized exchange rate stability for four consecutive years, aiming to stabilize market expectations and prevent the risk of two-way exchange rate overshooting, while allowing the market to determine exchange rate formation and maintaining the flexibility of two-way fluctuations. At the same time, it is necessary to enhance the forward-looking, targeted, and coordinated nature of policies, starting with "adjusting the structure and expanding domestic demand" to "reduce the surplus and promote balance," rather than forcing a rigid system to fit the bill.
Goldman Sachs Chief China Economist
CBN: Will gold continue to reach new highs? Can the global central bank’s gold purchases continue?
Flashlight: Looking back at 2025, gold prices accelerated their rise as US interest rates declined, increasing by approximately 65% from the beginning of the year to mid-December. Looking ahead to 2026, Goldman Sachs' commodities research team remains bullish on gold. We believe that structural demand maintained at high levels by central banks and cyclical factors resulting from the Fed's rate cuts will jointly continue to drive up gold prices in 2026. We predict that gold prices may rise further to $4,900 per ounce by the end of 2026.
Regarding central bank gold purchases, we expect them to remain strong in 2026, averaging 70 tons per month. This is close to the average monthly purchase of 66 tons by central banks over the past 12 months, but more than four times the average monthly purchase of 17 tons before 2022. There are three reasons supporting this strong demand: First, the freezing of Russian reserves in 2022 fundamentally changed the perspective of emerging market reserve managers on geopolitical risks. Emerging market central banks are diversifying their gold holdings to hedge against geopolitical risks. Second, including the People's Bank of China, the proportion of gold reserves held by emerging market central banks is estimated to still be relatively lower than that of global central banks. Third, our research shows that central bank demand for gold is now at a record high.
Beyond central bank gold purchases, the prospects for private allocation should not be underestimated. Currently, gold ETFs account for only 0.17% of US private financial portfolios, 6 basis points lower than the peak in 2012. We believe that private investors may expand their diversified gold allocations, which presents an upside risk to our base case scenario of gold prices rising to $4,900 by December 2026.
Chief Economist of Zhongtai International
CBN: Will US stocks hit new highs? Will the AI bubble burst?
Li Xunlei: Core conclusion 1: The US stock market's new high is supported by fundamentals and liquidity, but the process may be accompanied by volatility and will not be smooth sailing.
We believe there is a possibility that US stocks, especially indices led by tech giants, could continue to rise in 2026. This judgment is based primarily on the following key points:
First, the fundamental profitability of these companies is relatively solid, and valuations have not yet entered extreme ranges. Unlike the 2000 dot-com bubble, which was driven by concept stocks lacking revenue, this round of AI growth is led by tech giants with strong cash flow and clear profit margins (such as Microsoft and Google). Currently, the Nasdaq's price-to-earnings ratio is about 42, which, while not low, is far lower than the 122 at the peak of the 2000 bubble. At the same time, these giants' high-intensity capital expenditures are highly matched with their strong operating cash flow, and their net debt levels remain low, creating a solid financial safety net. This indicates that the market's upward trend is based on real profit growth, rather than purely on valuation bubbles.
Secondly, the macro liquidity environment may see a favorable shift. In the second half of 2026, the Federal Reserve chairman may change, and if a new candidate takes office, there is a possibility of a more dovish than expected policy shift. Once monetary policy becomes proactively easing, it will provide additional valuation support for the entire growth stock sector, especially interest rate-sensitive "long-duration" technology assets, thereby driving the index upward.
However, this process will not be smooth sailing. The main potential turning points are: First, in the first half of 2026, the Federal Reserve may maintain a generally hawkish stance, which will impose certain liquidity constraints on the market. Second, periodic tensions in US-China relations may cause emotional disturbances, such as in the early stages of the US midterm elections in May and June. Third, and most importantly, the market needs to continuously see the validation of AI investment translating into profits. If the profits of leading overseas AI companies continue to fall short of expectations, it could amplify short-term market volatility. Therefore, the path for US stocks to reach new highs is more likely to be a "volatile climb" driven by the resonance of profit realization and improved liquidity expectations, rather than a one-sided surge.
Second key conclusion: The current AI boom is fundamentally different from historical bubbles. The probability of a full-blown and devastating collapse similar to the dot-com bubble of 2000 is low, but severe differentiation and periodic adjustments within the industry are unavoidable.
We believe it's premature to assert that the "AI bubble" will be completely burst. A more accurate description is that the industry will enter a phase of selection and differentiation, weeding out the false and retaining the true. This judgment is supported by several structural characteristics of this AI wave:
First, the demand is genuine and faces hard constraints, unlike fictitious "round-trip transactions." A typical characteristic of the 2000 telecom bubble was a severe oversupply of fiber optic capacity, with companies artificially inflating revenue through asset swaps. However, the core characteristic of the current AI industry is a "computing power shortage." Data shows that the computational power required to train large models (FLOPs) is increasing several times per year, and it faces a hard constraint from the physical world—energy (electricity). This continuous "shortage economy," driven by real technological iteration, is drastically different from the typical "oversupply" characteristic of the bubble era.
Secondly, their capital expenditures are more "defensive" and strategically rational. The massive investments of tech giants are not disorderly expansion, but rather a "defensive" strategic layout to solidify their future competitive advantages. The risk of missing out on the AI era far outweighs the risk of overinvestment. At the same time, their investment pace demonstrates financial restraint, with capital expenditures primarily used to upgrade their existing massive asset base. This kind of investment, aimed at securing future competitive advantages, is more resilient and sustainable.
Third, the highly integrated industrial ecosystem enhances resilience. Unlike the fragmented telecom operators of 2000, AI development is currently driven by full-stack technology giants with businesses covering cloud, models, platforms, and applications. This vertically integrated ecosystem makes the industry chain more tightly coupled, potentially making it more resistant to fluctuations.
However, this does not mean there are no risks. The "J-curve effect" means that productivity growth lags behind investment peaks. Before AI investment fully translates into quantifiable productivity gains and widespread profitability, the market will inevitably scrutinize and question the rate of return on investment. Any signal of slowing technological iteration, underperforming earnings reports from leading companies, or tightening macro liquidity could trigger sharp corrections in overvalued stocks. Therefore, significant differentiation within the industry will be unavoidable: leading companies with genuine technological, product, cash flow, and ecosystem advantages are expected to weather the cycle, while many companies that merely ride the wave of hype and lack core competitiveness may be proven wrong when the tide recedes.
In summary, the prospects of the US stock market and the AI industry are closely intertwined in the dynamic balance of three variables: "real demand," "profit validation," and "liquidity pace." A more likely scenario is that the US stock market, supported by the profits of major players and expectations of easing liquidity, may challenge new highs, but the path will be fraught with difficulties. AI, as a profound and general-purpose technological revolution, has a real industrial prospect, but the capital market will ultimately select the true winners amidst alternating periods of euphoria and skepticism, rather than simply experiencing a bubble burst.
China
Guangkai Chief Industry Research Institute President and Chief Economist, Chairman of the China Chief Economist Forum
CBN: What are the prospects for China's economic growth in 2026? Where will the drivers and challenges of growth come from?
Lian Ping: In 2026, China's economy is expected to maintain growth of around 5%, with steady progress. From an external perspective, driven by expansionary fiscal and monetary policies of major economies, the global trade environment is expected to recover to some extent. Although the growth rate of imports and exports to the United States will continue to decline, exports to the EU, ASEAN, and Belt and Road countries will continue to grow, with electromechanical products and high-tech products continuing to play a stabilizing role in exports. The resilience created by diversified export markets and a medium-to-high-level export commodity structure will drive exports to maintain steady and relatively rapid growth.
In 2025, domestic demand growth faced significant pressure. The real estate market remained sluggish, and investment growth plummeted to -15.9%. Infrastructure investment growth continued to decline, even experiencing a period of negative growth. Driven by exports and production, manufacturing investment growth remained relatively stable. A significant decline in foreign investment led to a rapid slowdown in private investment. Due to pressure on employment, slowing income growth, and a rising propensity to save, consumption momentum was clearly insufficient. In 2026, counter-cyclical policies will be strengthened to stabilize the real estate market, promote investment recovery, and further stimulate consumption, gradually leading to an improvement in domestic demand.
Despite a general decline in food prices and strong expectations of a global crude oil oversupply, core CPI is expected to rise steadily in the second half of 2025, driven by rising upstream non-ferrous metal prices and the continued release of service consumption potential. Meanwhile, the year-on-year negative PPI is expected to narrow steadily. Supported by macroeconomic policies, particularly targeted monetary policy adjustments, the price situation is projected to improve further in 2026, with deflationary pressures gradually easing.
Currently, a new round of technological revolution is boosting the market's "scientific content," macroeconomic policies are creating a loose monetary and financial environment, asset allocation demand is undergoing a significant trend shift, quasi-stabilization funds are unprecedentedly protecting the market, and regulatory policy support is unprecedentedly strong. The "spring" of the Chinese stock market is arriving. In 2026, the Chinese stock market will better fulfill its function of direct financing, support the development of the real economy, increase investors' property income, and promote a stabilization of residents' consumption propensity.
In 2026, macroeconomic policies will be more proactive and effective. The fiscal deficit ratio and deficit size will expand reasonably from 2025 levels, the issuance of government bonds will increase, local government debt reduction measures will continue to be implemented, and fiscal spending will remain strong with some increases. The total new government debt may exceed 13 trillion yuan. A moderately loose monetary policy will continue to be implemented. To maintain ample liquidity and reduce financing costs, the central bank may continue to cut interest rates and reserve requirements, potentially lowering policy interest rates by 10 to 30 basis points and the reserve requirement ratio by approximately 50 basis points.
ICBC International Chief Economist
CBN: How will China continue to implement a moderately loose monetary policy? How should we understand flexible and efficient policy coordination?
Cheng Shi: Moderately loose monetary policy encompasses two important policy objectives: First, the overall tone is loose, creating a positive monetary and financial environment for the steady progress of macroeconomic recovery and high-quality development; second, the pace and intensity are moderate, aiming to unleash economic potential, providing overall support while maintaining some reserve capacity, taking into account changes in the international and domestic macroeconomic environment, and making timely and appropriate decisions. It is expected that in 2026, monetary policy will strengthen counter-cyclical and cross-cyclical adjustments through more abundant liquidity, smoother transmission mechanisms, and a more precise combination of structural tools, leveraging the integrated effect of existing and new policies to provide solid and powerful monetary and financial support for promoting demand recovery, driving a reasonable rebound in prices, and supporting effective growth of the real economy.
Taking into account both the global environment of interest rate cuts and the internal demand of the real economy, there is room for further reductions in China's policy interest rate and reserve requirement ratio. The market generally expects an interest rate cut of about 20 basis points and a reserve requirement ratio cut of about 50 basis points in 2026.
Meanwhile, the emphasis on "flexibility and efficiency" also signifies that monetary policy will play a more significant coordinating role within the macroeconomic policy framework, working alongside fiscal policy to enhance governance effectiveness. Against the backdrop of fiscal policy emphasizing "strengthening scientific fiscal management and optimizing the structure of fiscal expenditures," monetary policy, through measures such as reducing financing costs, improving credit conditions, and increasing willingness to lend, will further amplify the policy effects of fiscal support for expanding domestic demand, incentivizing technological innovation, and providing targeted assistance to small and medium-sized enterprises (SMEs). This will enable financial resources to reach the real economy more directly and effectively, thereby amplifying the multiplier effect of policy synergy and ensuring the effective implementation of the five key aspects of financial policy.
In summary, the flexible adjustment, cross-cycle allocation, and precise application of structural tools in a moderately loose monetary policy will be an important force in stabilizing macroeconomic expectations and boosting market confidence in 2026. It will also provide sustained support for promoting "effective qualitative improvement and reasonable quantitative growth" of the economy, and lay a solid foundation for a good start to the "15th Five-Year Plan".
Chief Economist of Yuekai Securities
CBN: In what specific aspects will the "more proactive fiscal policy" be reflected, and to what extent will it drive economic growth? Will fiscal policy be further strengthened next year to boost consumption?
Luo Zhiheng: In 2026, the fiscal situation will likely remain challenging, but the role of public finance as a foundation and crucial pillar of national governance means that fiscal policy must remain more proactive. This will involve using fiscal spending to drive overall social demand expansion, providing financial support for further expanding domestic demand, boosting consumption, stabilizing the real estate market, and ensuring the implementation of major projects in the first year of the 15th Five-Year Plan. Currently, fiscal policy has become a key policy for economic operation. Investment in goods influences investment, while investment in people influences consumption. Economic growth is projected to be around 5% next year. The core of current economic operation lies in the initiative of local governments. Increasing central government transfer payments or raising local debt limits to ensure local government initiative will help shift the behavior of residents and businesses from defensive to expansionary.
This proactive approach is reflected in the increased strength and structural optimization of fiscal expenditure. Firstly, in terms of strength, the scale of new debt in the current year, comprised of the deficit, special-purpose bonds, and ultra-long-term treasury bonds, is expected to further increase, with the deficit ratio projected to be no less than 4% and the deficit size approaching 6 trillion yuan. It is crucial to monitor whether the growth rate of fiscal expenditure can exceed the nominal GDP growth rate. Simultaneously, the scale of central government transfer payments to local governments will also further increase, likely remaining above 10 trillion yuan, thereby alleviating local fiscal difficulties and stimulating their enthusiasm and capacity for economic development. Secondly, in terms of structure, in recent years, the government has been continuously optimizing its expenditure structure. Expenditures on healthcare, elderly care, education, and housing security account for nearly 40% of fiscal expenditure, and this trend is expected to continue in 2026. The government aims to improve income distribution and the social security system through the optimization of its expenditure structure. It is anticipated that the "15th Five-Year Plan" will further increase childcare subsidies, extend the free preschool education period, and further increase pensions for urban and rural residents.
In 2026, fiscal stimulus to stabilize investment is essential, and further efforts to boost consumption will continue. While the scope and standards of national subsidies will change, greater attention should be paid to fiscal measures to increase residents' income. This includes increasing the income of low- and middle-income groups through transfer payments, raising urban and rural pensions, and reducing the costs of childbirth, education, and childcare. In the medium to long term, transferring state-owned assets to replenish the treasury and specifically using them to improve the social security system is an inevitable trend.
Nomura Securities Chief Economist
CBN: Can the real estate market stop falling and stabilize? Can market risks be cleared? What supportive policies are needed for the real estate market to gradually stabilize?
Lu Ting: The current real estate market is still in a downward phase, and we cannot be blindly optimistic. First, housing prices are still falling at an accelerated pace. Second-hand housing prices in 70 cities fell 0.7% month-on-month in November, higher than the 0.3% at the beginning of the year, and have fallen a cumulative 5.3% this year. Second, the sales area and value of new homes are also declining at an accelerated pace, falling 17.1% and 24.7% year-on-year respectively in November, compared to only 3.5% and 5.5% in the first half of the year. Third, the newly started construction area and investment scale in the real estate sector continue to shrink at an accelerated pace, falling 27.6% and 30.1% year-on-year respectively in November, compared to only 20.0% and 11.2% in the first quarter. Finally, a number of large real estate companies are still deeply mired in serious debt difficulties.
Against this backdrop, the downward spiral facing the real estate market has not only failed to ease but has intensified. The first spiral: the prolonged and widespread decline in housing prices has further weakened buyer expectations, creating a vicious cycle where falling prices and declining sales reinforce each other. The second spiral: real estate companies' reputations and buyer confidence have been severely damaged. Although the "guaranteed delivery" policy has achieved significant results over the past three years, most real estate companies are in a state of substantial default, almost completely losing their financing capabilities and unable to restore their credit. They cannot obtain normal financing, nor can they replicate the pre-sale model. Furthermore, selling completed properties places even higher demands on real estate companies' financing, making it difficult for troubled companies to recover. The third spiral: the real estate downturn has created a negative feedback loop with local government finances. Local governments are forced to cut public spending, affecting salary payments and dragging down real estate demand; fiscal pressure has also spurred "profit-driven enforcement," leading to a continued deterioration of the business environment.
There is hope that the real estate market will stabilize and recover by 2026, but we must face the severe situation squarely, lower expectations, and prepare for another decline in the real estate market. From a long-term perspective, real estate remains one of the pillars of the national economy. Even if housing prices fall by 30% from their peak, they will still account for more than 50% of residents' wealth. my country's urbanization is not yet complete (67% of the population lives in cities, and more than half are registered residents), and about 20% of the population will still need to migrate to cities in the future; 10 million graduates each year bring rigid housing demand; inter-city population flow continues, and the siphon effect of core cities is strengthening; the demand for improved housing is enormous. At the same time, fiscal reform takes time, land revenue cannot be stopped abruptly, and traditional economic elements, including food, clothing, housing, and transportation, remain the ballast of the national economy.
From a policy-making perspective, I believe the policies needed to stabilize the real estate market can be summarized in eight words: "clearing out, relaxing, following the trend, and supporting." "Clearing out" is fundamental: five years of continuous contraction in the real estate industry have created a complex chain of bad debts and broken credit relationships. Without clearing out the debt, the transmission of monetary policy will be hindered. For large, nationwide problematic real estate companies, the central government should coordinate the debt cleanup; the financial debts of real estate companies and inter-company debts need to be reviewed simultaneously to avoid the worsening of triangular debt. Debt repayment and bankruptcy reorganization are not about saving real estate companies, but about protecting the interests of all parties and ensuring the normal operation of the economy. "Relaxing" refers to clearing up policies restricting transactions such as purchase and sale restrictions. "Following the trend" means breaking down policies that distort land resource allocation, residency, and population flow, allowing market mechanisms to determine land allocation and development. Regarding "supporting," firstly, financial support, mainly accelerating the establishment of a financing system suitable for the sale of existing homes; secondly, fiscal support, especially increasing the scale of government acquisition of commercial housing for the purpose of providing affordable housing; and thirdly, infrastructure support, the key being to prioritize infrastructure construction in cities with net population inflows to prevent fiscal collapse from triggering a chain reaction of shrinking consumer and investment spending. Whether the real estate market can eventually stabilize in the next few years depends on the effectiveness of debt clearing and policy coordination, rather than short-term stimulus.
Lianhua Asset Management Co., Ltd. Managing Partner and Chief Investment Officer, renowned economist
CBN: Can the A-share market hold above 4,000 points? Can AI and related technology stocks continue to drive the market? Where is the next hot spot for A-shares?
Hong Hao: Standing at this crucial cyclical juncture of 2025, we are not only discussing a specific point in time, but also a "paradigm shift" in the ecosystem of China's capital market. Regarding the three core issues of concern to everyone, I will systematically share my observations and thoughts:
I. 4000 points: From "psychological barrier" to "mean reversion" support level
Regarding whether the Shanghai Composite Index can hold above 4,000 points, my view has always been quite clear: 4,000 points should not be regarded as the end of the rise, but rather as a new starting point for the revaluation of Chinese assets.
From a macroeconomic perspective, the A-share market has undergone a long period of fluctuation and bottoming out. If measured by the "Buffett Indicator" (total market capitalization/GDP), the valuation level of the Chinese stock market has been far below its long-term average for a considerable period. If measured by the ratio of market capitalization to broad money supply and household deposits, the valuation of the Chinese market at the current 4000-point level is only near its long-term average. Currently, we are in a clear mean reversion process. As an important psychological level, 4000 points will indeed experience some fluctuations and uncertainty in the short term due to profit-taking. However, with the successive establishment of the policy bottom (September 2024), sentiment bottom (end of 2024), and liquidity bottom (July 2025), it is expected to transform from a past "resistance level" into a future "strong support level."
More importantly, the forces driving this round of market stabilization above 4000 points have undergone a structural change. In the past, it was a retail investor-driven "bull market," but now we are seeing a return of pricing power dominated by ETFs, long-term institutional funds, and some returning foreign capital. When the market's "denominator" (liquidity and risk appetite) continues to improve, and the "numerator" (corporate profitability) bottoms out and rebounds in the first year of the 15th Five-Year Plan, stabilizing above 4000 points will be a highly probable event.
II. AI and Technology Stocks: A Long and Steady Slope Amidst the Productivity Revolution
Regarding whether AI and related technology stocks can continue to drive the market, I believe this is no longer a "short-term theme," but rather a revolution in total factor productivity.
As I have emphasized many times before, the emergence of artificial intelligence (AI) marks the beginning of a new era where "language is instruction." Although there is much debate in the market about whether there is a bubble in AI, from a long-term historical perspective, every great technological revolution is accompanied by a huge bubble at its peak, and the rising phase of the bubble is often the most attractive stage for investment returns.
For Chinese tech stocks, the core logic lies in "self-reliance and control" and "vertical applications." Despite limited computing power, Chinese companies have demonstrated remarkable resilience in AI applications, HBM (high-bandwidth memory), domestic chip substitution, and AI-enabled traditional manufacturing (AI+). The performance of tech stocks will shift from "sentiment premium" to "earnings realization." As long as the current economic cycle stabilizes and liquidity remains ample, technological self-reliance will be a major story lasting at least five years. It will not only lead the market but also be the core engine reshaping China's industrial structure.
III. The Next Big Thing: The Intersection of Policy Support and Asset Revaluation
If you ask where the next big opportunity in the A-share market lies, I think we should focus on three keywords: new quality productivity, RMB revaluation, and consumption transformation.
New Productivity and Going Global: With the implementation of the 15th Five-Year Plan, China's advanced manufacturing industries with global competitiveness—the main force in "going global"—will see a valuation recovery. They are not only making money domestically, but also globally.
The safe-haven nature of RMB assets: With the shift in the Federal Reserve's monetary policy and fluctuations in the dollar credit cycle, RMB assets are transforming from "risk assets" to "safe-haven assets." The potential appreciation of the RMB exchange rate will drive a systemic revaluation of domestic asset prices.
The "Year One of Transformation" in Consumption: Around 2026 will mark a formal turning point in China's consumption structure, shifting from a focus on "quantity" to a focus on "quality." Policies aimed at boosting domestic demand will no longer be limited to traditional home appliances and automobiles, but will instead focus on new service and brand consumption driven by improvements in social welfare and increased purchasing power.
The above are all key work priorities for the coming years outlined in the 15th Five-Year Plan. Furthermore, in a low-interest-rate environment, high-dividend-yield, low-volatility dividend assets should remain a cornerstone of core portfolio holdings. Gold, silver, and other precious metals should be considered as asset allocations for investors to hedge against the long-term trend of dollar depreciation.
Therefore, for investors, the current strategy should not be to blindly "take profits," but rather to identify and retain strong performers amidst market fluctuations. The outlook above 4000 points depends on our deep understanding of the logic behind China's economic transformation.
