Goldman Sachs sees further China equities upside on AI and earnings growth: "Prominent 10"

Further Growth Prospects for Chinese Equities

Goldman Sachs forecasts a continued rise in Chinese equities through 2026, supported by the adoption of artificial intelligence, policy backing, and improving earnings momentum. Reports suggest the MSCI China Index may increase by 20% from the end of 2025 to the end of 2026, while the CSI 300 Index is projected to rise approximately 12%.

Earnings-Driven Returns

Notably, returns in 2026 are expected to be primarily driven by corporate earnings growth, marking a shift away from purely valuation-driven rebounds. Key factors include AI deployment and China’s "going global" export strategy.

Capital Inflows Supporting Stocks

Goldman identifies five main channels for capital inflows that could bolster equities: record southbound inflows, domestic asset reallocations possibly channeling RMB 3 trillion into stocks, and significant dividends and buybacks totaling up to RMB 4 trillion.

Macro Economic View

At the macro level, Goldman has raised its GDP growth forecast for 2026, attributing it to resilient exports and improved export diversification. The conditions are expected to remain supportive through the launch of the 15th Five-Year Plan.

Bullish on Tech Sector

Particularly bullish on the TMT sectors, Goldman anticipates around 20% earnings growth driven by AI-related revenues and capex. They are optimistic about technology, media, entertainment, and online retail sectors.

Risk Factors

However, risks such as a potential global recession and ongoing geopolitical tensions may exist, although Goldman argues that China’s relatively lower valuations and broader AI exposure offer some insulation from these risks.