In Chinese culture, the horse symbolises an energetic and dynamic spirit. After lagging many of its regional peers in returns since the beginning of the decade, investors are looking for China to build on its solid performance over the past 12 months and continue to stride forward during the Year of the Horse.
Ernest Yeung, portfolio manager of the T. Rowe Price Emerging Markets Discovery Equity strategy
China is certainly now back on the radar of investors, and the outlook appears more positive than it has for some time. After a long period of weak sentiment, we are seeing signs of improving earnings, more stable policy signals, and renewed momentum in key technology areas such as AI, semiconductors, robotics, and healthcare.
This recovery looks more structural than cyclical, supported by improving governance and domestic investment rather than short-term stimulus. Indeed, the much-anticipated big stimulus package has not been forthcoming. A key foundation of the recovery is due to the self-help actions taken by private companies in response to the soft economic backdrop.
From an allocation perspective, China remains the most influential country within emerging markets. As a result, investors with exposure to EM or Asia are naturally expressing part of that view through China. We are encouraged by the self-help initiatives undertaken by many private companies, and the cost-cutting efforts over the past few years are now reflected in improved profitability.
Risks remain, including sensitivity to global growth, geopolitics, and changes in domestic policy. Sentiment can also shift quickly. However, with earnings growth expected to exceed developed markets in 2026 and valuations still relatively low, the overall risk–reward balance looks increasingly attractive.
Nicole Lim, equity research analyst at Thornburg Investment Management
China remains a large, dynamic, and selective opportunity set for active investors. Last year’s market recovery was driven largely by multiple expansion, supported by themes such as AI and renewed participation from both institutional and retail investors in Mainland China.
Looking ahead, returns are likely to be more earnings-led, underpinned by improving fundamentals and a more shareholder-friendly backdrop, including higher dividend payouts, increased share buyback activity, and policy support aimed at encouraging capital returns.
On the consumer side, post-pandemic shifts in Chinese behaviour appear durable. Demand for fitness, outdoor recreation, and wellness adjacent categories remains structurally elevated. Domestic brands continue to gain share across apparel, personal care, and mobility. For multinational players, the bar has clearly been reset – success now requires best-in-class localisation, faster product cycles, and platform-native distribution strategies aligned with how Chinese consumers actually engage.
Still, a cautious savings mindset persists. Consumer sentiment remains measured, with households being more selective about where they spend rather than pulling back outright. In that sense, China continues to function as both a competitive market and a learning ground for international companies as they are often at the cutting edge of consumer experiences, digital engagement, and go-to-market innovation.
Pierre-Henri Cloarec, portfolio manager of Nordea’s Emerging Sustainable Stars Equity strategy
China remains central to the emerging markets story. The country has been affected by overcapacity in parts of the industrial sector for a number of years, resulting in prolonged producer price deflation that has pressured corporate margins. However, policymakers are taking steps to address these imbalances and to stimulate consumption.
The Chinese equity market has disappointed investors in the past, so caution is warranted. But the current policy direction appears constructive, even if implementation will take time in such a large economy. If these efforts are successful, it could provide an additional leg to the strong emerging markets backdrop witnessed over the past 12 months.
Our primary exposure to China is focused on companies benefiting from AI adoption through their ecosystem flywheel, such as Tencent and Alibaba. Tencent is leveraging AI across its vast ecosystem, including advertising monetisation on its social platforms and content creation in gaming. Alibaba’s proprietary large language model, Qwen, leverages its comprehensive ecosystem and should fuel growth in its core e-commerce business.
Also, as the largest cloud provider in China, Alibaba is well-positioned to capture the acceleration in cloud adoption as companies increasingly require the infrastructure to deploy AI tools. We also see opportunities in battery technology. CATL, a global leader in EV and energy storage system batteries, is well positioned to benefit from rising energy storage demand driven by data centres and AI-related electricity needs.
Rob Drijkoningen, co-head of emerging markets debt at Neuberger
China remains the largest market in Asia and is deep and liquid. The country offers opportunities for investors in the bond market, which lie in high-quality assets and sectors with solid fundamentals – such as AI and advanced manufacturing – where careful selection can exploit repricing potential amid a complex macroeconomic and political transition. We also believe that the government is more determined to stabilise the real estate sector.
From a macro perspective, our outlook for China remains constructive but uneven. We expect GDP growth to slow to below 5% in 2026. The growth mix is bifurcated: manufacturing and exports are relatively resilient, while consumption remains soft amid a structural property-sector drag.
We expect the policy focus going forward to be on weighing near-term stabilisation against medium-term rebalancing as the 15th Five-Year Plan framework comes into focus. The overall policy stance is likely to stay modestly expansionary and supply-centric with incremental monetary easing and a more proactive fiscal stance to ensure ample liquidity.
From a portfolio allocation perspective, China remains strategically important given its weight in global supply chains and EM benchmarks, but we prefer selective, risk-budgeted exposure rather than broad beta exposure at this point. Key risks going forward are primarily geopolitical – particularly US trade policy and potential spillovers to other partners – alongside overcapacity in some sectors and the continuing drag from property weakness and deflationary pressures.
Tom Kynge, portfolio manager, multi-asset at Sarasin & Partners
China is complex. On the one hand, you have incredible companies and technological innovation. On the other hand, the policy environment can create uncertainty for investors, as it is not always a capital-markets-first environment. However, when you look at the level of innovation in China relative to the valuations placed on some of these companies, there are opportunities in businesses exposed to attractive end markets with strong structural growth characteristics.
For example, humanoid robots are likely to become a major theme over the next decade, and the world’s leading companies are Chinese. At the moment, many of these businesses are overlooked by global investors due to geopolitical and governance concerns.
Chinese state policy has, at times, imposed significant losses on shareholders when the company’s objectives conflict with those of the CCP. Therefore, the best method of investing in Chinese equity markets is to identify companies where the interests of shareholders are aligned with the CCP.
This is most clearly the case for companies that are leaders in key technological frontiers, as China seeks to establish itself as a global technology leader. Examples include electric vehicles, solar panels, AI model training, and potentially humanoid robotics. Our research is focused on identifying companies with technological differentiation, pricing power within their niche, and alignment with long-term policy direction.
