Analysts are predicting a strong year for Chinese equities this year, with gains as high as 20 per cent by year-end.
That’s according to the latest analysis by Goldman Sachs, which forecasts the MSCI China Index to end the year 20 per cent up on its 2025 close, and for the CSI 300 to gain 12 per cent.
In a note seen by Bloomberg, analysts at the investment bank said that strong corporate profits and AI growth would help extend the rally, following a strong 2025.
It comes as Beijing pursues a policy of squashing involution, with officials pushing major firms to “enhance their investment value”. Breakingviews, Reuters financial commentary brand, predicts the policy will push corporate profits higher, with exporters like BYD benefitting as a result.
All this against the backdrop of projections of solid economic growth, with economists broadly predicting 4.5 to 4.9 per cent GDP growth in 2026 – below Beijing’s 5 per cent target, but substantial nonetheless.
Yet at the same time, there are clear downside risks emerging. Many forecasters have priced in increased trade stability, with newly threatened sanctions over Iran potentially impacting China, threatening to cause more turbulence just as the dust had settled.
There is also a high degree of uncertainty around China’s plans to boost domestic consumption, which remains depressed, the impact of Beijing’s stimulus measures, as well as the strength of global demand in the year ahead.
All these factors and more could weigh on, or if they surprise to the upside, drive forward growth in Chinese equities. In this article, we examine the latest forecasts for Chinese stocks and identify the forces driving gains and the risks which potentially stand to curb them.
Will Chinese Stocks Do Well in 2026?
Last year, the MSCI China Index beat the S&P 500, gaining 29 per cent, and some experts believe it could be poised to put on a repeat performance.
According to Barron’s, fund managers see opportunities in China’s so-called new economy, emerging sectors like AI and robotics, which have massive growth potential.
While China’s property sector, once the engine of the economy, has stalled, investors are hopeful that advanced manufacturing, semiconductors and automation could more than make up for shortfalls in the “old economy”.
In 2025, China increased semiconductor production by around 35 per cent, grew hi-tech exports by 6.8 per cent and boosted its grid and data centre investments by around 10 per cent.
This puts them in a strong position to capitalise on AI-driven gains, but potentially also exposes some firms to the fallout of a potential bubble event. As ING analysts note: “Winning the tech race would provide the most obvious catalyst for securing China’s long-term growth trajectory…
“At the same time, it’s wise not to put all the eggs in one basket, so to speak. Setbacks could result in numerous failed investments and further hits to sentiment.”
In other words, right now, analysts expect emerging technologies to drive gains in the Chinese economy and amongst Chinese equities, but that dependence could also be a liability.
But global investment firms don’t see that risk as likely to materialise this year, with major funds reportedly placing “big bets” on Chinese stocks and the Chinese yuan.
In recent weeks, Goldman Sachs and Bernstein have upgraded their outlook for Chinese equities, with a key gauge of investor sentiment, turnover in onshore stocks, reaching record levels in early January.
Speaking to Bloomberg, Wang Dan, of Shenzhen Sunrise Asset Management, predicted: “A slow bull trend in equities will continue this year…
“While economic fundamentals and data don’t support a full-blown bull market, declining interest rates, stronger willingness for investment allocation and long-term positioning in undervalued assets [support the run]”
It comes after analysts at Franklin Templeton said the outlook for Chinese equities in 2026 looked “bright”, noting Chinese resilience in the face of US trade policy, and the potential for anti-involution policies to fuel gains.
According to the January report, the consensus forecast for the MSCI China shows 15 per cent earnings growth, and more than double that, 35 per cent, in the consumer discretionary sector.
Analysts said they were “positive on the semiconductor, consumer discretionary, power equipment and biotech sectors.”
Investors Taking Renewed Interest in China
Investors are said to be taking a second look at Chinese equities, after a strong 2025 in which China demonstrated economic resilience and embraced new and emerging technologies.
That’s the view of Fidelity’s George Efstathopoulos, who told CNBC’s Squawk Box Asia programme that he expects increased allocations to China, which he said is no longer seen as “uninvestable.”
Efstathopoulos said China equities had been delivering returns for the past two and a half years, and that the trend could extend through 2026, particularly in light of recent governance reforms.
Other analysts see the potential for a broader reallocation from West to East, with China standing to be the main beneficiary. Aspen believes this trend could precipitate a decade of growth in Chinese markets, as investors seek what they have dubbed the “Four Seasons portfolio.”
In other words, because Chinese equities show low levels of correlation with American markets, they may become a more attractive diversification option for investors in the future.
But some remain cautious about the latent risks, not least the potential for intervention in the economy and markets by the Chinese Communist Party, which could work to the detriment of investors and capital.
The Pros and Cons of Investing in China
Right now, the consensus among analysts is that Chinese equities will extend their run through 2026, continuing to post gains as emerging technologies, governance reforms and economic growth fuel the rally.
A number of banks and asset managers see the potential for an earnings-driven rally supported by AI and high-tech manufacturing. Goldman Sachs projects substantial further upside, forecasting the MSCI China to rise roughly 20 per cent and the CSI 300 about 12 per cent by year-end 2026.
Franklin Templeton has described the outlook as “bright,” highlighting semiconductor, consumer discretionary, power-equipment and biotech pockets where consensus earnings growth for MSCI China is seen rising materially.
Exports and infrastructure/AI-related capex (data centres, grids, chips), in addition to Beijing’s anti-involution push to improve corporate margins, are broadly cited as concrete catalysts.
However, there are downside risks to the outlook. Geopolitics remains volatile: recent US threats of tariffs and secondary measures tied to Iran have renewed concerns that trade or sanction actions could spill over into China’s trade and supply chains.
While AI and semiconductors are tailwinds, strategists caution that heavy concentration in a few high-growth themes raises bubble and sentiment-risk: if AI exuberance fades, tech-heavy indices could be vulnerable.
Put simply, experts see it more likely than not that there could be further upside in 2026, pointing to earnings momentum, policy support and rerated valuations, but they also warn of risks posed by geopolitical developments, weak domestic consumption, and theme-concentration.
Summary
Analysts say Chinese equities look promising for 2026. Goldman Sachs and other major houses point to an earnings-driven rally powered by AI, semiconductors and infrastructure capex amid solid GDP growth (4.5–4.9 per cent). However, geopolitics, possible sanctions, weak domestic consumption, regulatory intervention and heavy concentration in tech are key downside risks that could curb gains.
