Global Demand Reshapes China A-Shares: A Complete Guide to 2026 Investment Positioning

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In 2026, the reshaping of global demand will become the core variable driving A-share performance. The market is widely expecting a steady, systemic bull market in which earnings take over from valuations as the key driver.

When global liquidity reaches an inflection point and the Chinese mainland’s “15th Five-Year Plan” opens a new chapter, where should investors deploy their capital?

This is guiding the capital market into a brand-new stage, where corporate fundamentals become the key to assessing value.

Key Takeaways

• In 2026, the A-share market will shift from focusing on valuation levels to focusing on companies’ ability to generate profits. The more money a company makes, the more room there is for its share price to rise.
• The global economy is improving, and U.S. interest rates may fall, which will channel more money into the stock market. Chinese companies are also actively expanding overseas to earn a larger share of profits from abroad.
• The Chinese government will strongly support high-tech industries such as new energy, new materials and artificial intelligence. These sectors will be key drivers of future economic growth.
• When investing, you can focus on two types of stocks at the same time: high-tech growth stocks such as AI and semiconductors, and stable value stocks such as high-dividend state-owned enterprises and companies whose products are sold worldwide.

Earnings Take Over from Valuations: Outlook for A-Shares in 2026

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Leaving behind the past phase of liquidity-driven valuation expansion, the A-share market in 2026 is entering a key turning point. A market consensus is gradually forming that corporate earnings will replace valuations as the core force driving the market higher. This means that a “systemic slow bull” market based on improving fundamentals is taking shape. Views from multiple leading institutions also support this judgment.

Research reports from PuBank International and UBS both stress that earnings growth will be the key driver of future market performance. CITIC Securities and Soochow Securities go further, explicitly stating that the market is likely to enter a “slow bull” or “systemic slow uptrend” phase.

This shift is not happening in a vacuum; it is underpinned by both global macro conditions and a reshaping of corporate fundamentals in the Chinese mainland.

Global Liquidity Inflection Point and Rising Risk Appetite

The single most important variable affecting global capital flows—the U.S. Federal Reserve’s monetary policy—is standing at a turning point. Although inflation pressures make the policy path uncertain, the market generally believes that the tightening cycle is nearing its end.

• The market expects the Federal Reserve to keep rates on hold over the next several meetings and, if the data allow, to cut rates by 25 basis points.
• As of early 2025, market pricing reflects the possibility that the Fed will begin cutting rates around mid-year, gradually guiding the federal funds rate lower.
• At the same time, the Fed is shrinking its massive balance sheet, which reduces liquidity in the banking system and remains a key focus for markets in terms of its eventual size and impact.

Although the Fed has reduced its projected number of rate cuts for 2025, and institutions such as the BlackRock Investment Institute expect rates to be “higher for longer,” the fact that the rate peak has been established is enough on its own to change global investors’ risk appetite. When risk-free rates peak and then decline, capital flows out of high-yielding money-market funds and bonds and back into risk assets such as equities in search of higher returns. This brings valuable incremental capital to emerging markets including A-shares and provides a positive boost to A-share performance.

Expanding Global Exposure and Reshaped Fundamentals in A-Shares

In the past, the A-share market was often viewed as a relatively closed system whose performance was driven mainly by domestic policy and liquidity in the Chinese mainland. That picture is changing fundamentally. More and more high-quality Chinese companies, especially in new energy, advanced manufacturing and consumer electronics, are actively expanding into overseas markets, significantly increasing their “global exposure.”

This means that companies’ revenues and profits are no longer solely dependent on demand in the Chinese mainland; instead, they are tightly linked to global economic cycles and overseas consumer demand. As the global economy—particularly Europe and the U.S.—emerges from the shadow of high inflation and high interest rates and gradually enters a restocking phase and a demand recovery, Chinese companies that are globally competitive will be the first to benefit. Their overseas orders will increase, earnings expectations will improve, and this will provide solid fundamental support for their share prices.

The Shift from Valuation-Driven to Earnings-Driven

Taking the above two points together, the core logic for A-shares in 2026 becomes clear:

1. Improving external environment: Global liquidity is shifting from tight to loose, lifting overall risk appetite and the valuation anchor for the market.
2. Stronger internal momentum: Chinese companies, leveraging their global competitiveness, capture overseas demand recovery and achieve real earnings growth.

In past bull markets, market rises often took the form of “a rising tide lifts all boats,” driven largely by multiple expansion under abundant liquidity, meaning that share prices rose broadly regardless of whether earnings were strong or weak. In contrast, the 2026 market will put more emphasis on “real substance.” Capital will become more selective, flowing first to companies that can convert global demand into tangible revenue and profit streams.

Therefore, the market will shift from a broad “valuation bull market” to a more structural “earnings bull market.” This demands more of investors, who will need to analyze corporate fundamentals in greater depth to identify truly high-quality companies with long-term growth potential. This new systemic slow bull market driven by earnings will be steadier and more durable, delivering substantial returns for long-term, valuation-focused investors. A more resilient A-share trend will be built on solid earnings growth.

New Policy Landscape: New Quality Productive Forces and High-Quality Growth

If the global demand recovery is the “outer wheel” driving A-shares higher, then the new policy landscape in the Chinese mainland is the “inner wheel” providing endogenous momentum. As we move into 2026 and the blueprint of the 15th Five-Year Plan gradually unfolds, industrial upgrading centered on “new quality productive forces” and value re-rating driven by the deepening of “Chinese-style valuations” (“China Special Valuation System”) together form the main policy axis for market development. This not only injects momentum for high-quality growth into the economy but also points investors toward clear directions for capital allocation.

Strategic Emerging Industries in the 15th Five-Year Plan

Top-level policy design is the most reliable compass for long-term investing. Looking ahead to 2026, the 15th Five-Year Plan will continue and deepen support for strategic emerging industries. Policy recommendations clearly call for accelerating the creation of new pillars of growth, especially by building industrial clusters in the following key fields:

• New energy
• New materials
• Aerospace
• Low-altitude economy

These sectors represent the core engines of future economic expansion and are expected to receive sustained policy support, making them long-term focal points for capital markets.

Concrete Investment Paths Under “New Quality Productive Forces”

“New quality productive forces” is the key concept for understanding the current policy direction. It is not merely a traditional productivity improvement but emphasizes a leap driven by technological innovation.

According to official definitions, new quality productive forces represent an advanced form of productivity that breaks away from traditional growth paths, with core characteristics of high technology, high efficiency and high quality.

This means that policy support will be concentrated in cutting-edge fields that can drive industrial transformation. Specifically, the investment path points clearly toward areas such as biomanufacturing, innovative drugs, artificial intelligence and humanoid robots. For example, efforts by the Chinese mainland to promote the application of AI foundation models will directly spur global demand for data centers and high-end semiconductors, creating opportunities for U.S. tech companies at the upstream end of the supply chain.

Deepening “Chinese-Style Valuations” and a Focus on High-Quality Returns

While pushing technological innovation, policy is also guiding the capital market to refocus on value. The “China Special Valuation System” is moving from concept to implementation. The China Securities Regulatory Commission (CSRC) has issued clear guidance requiring listed companies—especially state-owned enterprises (SOEs)—to include market value management in senior management performance evaluations.

The aim of this reform is to enhance the investment value of listed companies and improve shareholder returns. Data show that under policy guidance, SOEs’ willingness and ability to pay dividends have risen significantly, and their total dividends in 2023 have increased sharply compared with 2019. This marks a shift in SOEs from simple scale expansion to a high-quality development model that emphasizes shareholder returns. The potential for valuation re-rating in this group deserves close attention from investors.

Dual-Track Allocation: Balancing Tech Growth and Value Defense

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In a “systemic slow bull” driven by earnings, a single investment style is not enough to cope with a complex market structure. Smart capital allocation should adopt a dual-track strategy that combines offense and defense. Similar to the “advance” and “diversify” concept advocated by Fidelity Funds, this requires investors to capture growth flexibility from technological innovation with one hand, while using value stocks to diversify risk and lock in predictable returns with the other. This balanced configuration is the key to navigating market volatility in 2026 and achieving steady gains.

Tech Track: Focus on AI, Self-Reliance in the Supply Chain and New Energy

The tech track is the “offensive spear” of the portfolio, aiming to capture high-growth opportunities catalyzed by policies supporting new quality productive forces. Capital will continue to focus on three major directions with long-term disruptive potential.

• Commercialization of artificial intelligence (AI): AI development has moved from a race in base models to a deeper commercialization phase at the application layer. Market focus will shift to companies that can deeply integrate AI technologies into specific industry scenarios and turn them into real revenue and profit. For example, AI-powered solutions in finance, healthcare and industrial manufacturing will demonstrate enormous commercial value.

• Deepening of self-reliant industrial chains: Achieving self-reliance in the semiconductor supply chain is at the core of national strategy. While Chinese companies have made progress in some segments, they still face challenges in critical equipment, which also implies huge potential for domestic substitution.

  High technology, high efficiency and high quality are the core features of new quality productive forces, and semiconductor equipment is a prime manifestation. Government incentives and external export controls are together pushing domestic leaders such as NAURA Technology Group and Advanced Micro-Fabrication Equipment Inc. (AMEC) to accelerate their catch-up.
  Data show that in cutting-edge areas such as lithography, overseas suppliers still hold overwhelming dominance.

  Equipment Type	China Market Share (2024)	U.S. Market Share (2024)	Japan Market Share (2024)	Netherlands Market Share (2024)
  Linear and discrete test tools	69%	16%	N/A	N/A
  Lithography tools	4% (i-line)	N/A	17%	79%
  Advanced packaging tools	7%	65%	15%	N/A

  This large gap is precisely where long-term investment opportunities lie. As technology breakthroughs materialize, the semiconductor equipment and materials space is likely to give birth to globally competitive champions.

• Technological iteration in new energy: The new energy sector is shifting from a focus on capacity expansion to technology innovation. Investment opportunities are no longer about simple capacity races but are instead concentrated in technology directions that can lead the industry, such as new energy storage (e.g., sodium-ion batteries, all-solid-state batteries) and high-efficiency photovoltaic technologies. Breakthroughs in these areas will reshape the energy landscape and bring highly visible growth prospects to related companies.

Value Track: Capture High Dividends, “Going Global” Chains and Resource Plays

The value track is the “defensive shield” of the portfolio, designed to hedge uncertainties and provide stable cash flows and a margin of safety. This track is closely linked to the deepening of the “China Special Valuation System” and the macro backdrop of global demand recovery.

• Value re-rating of high-dividend SOEs: In a rate-cutting cycle, the China Special Valuation System is creating a historic allocation opportunity for high-dividend SOEs. The State-owned Assets Supervision and Administration Commission (SASAC) has incorporated “market value management” into performance assessments, pushing SOEs to enhance shareholder returns.

  As of February 2025, the yield on 10-year Chinese government bonds has fallen to about 1.77%. By contrast, ETFs tracking the CSI Dividend Index have delivered an average net dividend yield of 4.6% over the past four years, making their appeal obvious.

  In particular, SOEs in telecom, energy, utilities and infrastructure offer highly attractive valuations and dividend returns.

  Sector	Dividend Yield	Price-Earnings Ratio (P/E)
  Telecom	5%–7%	Single-digit
  Energy	5%–7%	Single-digit
  Utilities	5%–7%	Single-digit
  Infrastructure	5%–7%	Single-digit

  These companies not only provide stable cash flows, but their potential for valuation repair also offers strong support for a more resilient A-share market.

• “Going global” supply chains with overseas exposure: This track is the most direct expression of the theme “global demand reshapes A-shares.” A group of Chinese companies with strong global competitiveness in sectors such as construction machinery, automobiles and parts, consumer electronics and cross-border e-commerce will directly benefit from overseas demand recovery. Their overseas revenue share continues to rise, making their earnings growth less dependent on the domestic market and giving them stronger earnings elasticity and resilience.

• Resource plays in a restocking cycle: As the global economy gradually emerges from a high-rate environment, manufacturing is entering a restocking cycle, which will boost demand for industrial metals and other commodities. Copper, often seen as a “barometer” of the economy, is already reflecting this trend in its price outlook.

  Several leading institutions are bullish on future copper prices. Deutsche Bank forecasts that if global demand recovers, copper prices could exceed US＄10,000 per ton by the end of 2026. J.P. Morgan is even more optimistic, projecting that copper could reach US$12,500 per ton in the second quarter of 2026.

This offers a clear path for earnings improvement at upstream resource companies, making them an important cyclical component within the value track.

Looking ahead to 2026, a more resilient A-share trend will be powered by two engines. Externally, global demand recovery provides momentum; internally, national strategies such as new quality productive forces inject energy. The market’s core logic has shifted from valuations to earnings, and a systemic slow bull market built on improving fundamentals is underway.

💡 Investors should stay patient and maintain strategic discipline, adopting a balanced dual-track allocation of “tech growth” and “value defense” to capture structural opportunities.

It is time to move on from zero-sum games in a stock-only environment and embrace incremental opportunities driven by earnings. The year 2026 will be pivotal for the value of high-quality companies to be recognized.

FAQ

What will be the core driver of the A-share market in 2026?

The core driver is shifting from valuation expansion to corporate earnings growth. Global demand recovery and industrial upgrading in the Chinese mainland are together supporting an improvement in fundamentals. This change is expected to give rise to a systemic slow bull market driven by earnings, with a more stable and sustainable trajectory.

What are the main risks facing investors?

The main risks stem from uncertainty in the external environment. If the global economic recovery falls short of expectations, export demand will be dampened. In addition, rising geopolitical tensions and changes in the path of U.S. monetary policy could affect global capital flows and market sentiment, triggering volatility.

What does “new quality productive forces” mean for investment positioning?

“New quality productive forces” mean that policy resources will be concentrated in high-tech, high-efficiency frontier industries. For investors, this points clearly to long-term opportunities in strategic areas such as artificial intelligence, biomanufacturing and new energy technologies. These industries are likely to receive sustained policy support and become core engines of future growth.

How should investors choose between tech stocks and value stocks?

A balanced allocation strategy is recommended. The tech track captures high-growth potential driven by industrial innovation, while the value track—such as high-dividend SOEs and “going global” companies—provides defensiveness and stable cash returns. Combining the two helps investors navigate structural rotations in the market and achieve more resilient portfolio performance.