Improved US-China trade relations, China’s AI developments, upbeat Chinese economic indicators, and the prospect of fresh policy support have boosted demand for Mainland-listed stocks. These factors support the bullish short- to medium-term outlook for Mainland China indices, aligning with Goldman Sachs’ view.
In December, Goldman Sachs signaled a positive outlook for Mainland stocks and a potential rotation from US to Chinese stocks. CN Wire reported:
“2026-2027 forecasts: Expect continued bull run, but at a slower pace. Projected gains: +38% by end of 2027, supported by 14% profit growth in 2026E and 12% in 2027E. […] AI breakthroughs have redefined the narrative for tech equities. […] Widespread AI adoption could drive ~3% annual earnings growth over the next decade via cost savings, productivity, and new revenue streams. Valuations in China’s AI tech sector have re-rated, but remain cheaper than U.S. peers.”
Chinese Economic Indicators Boost Optimism
Recent Chinese economic indicators have fueled hopes of a pickup in momentum. The RatingDog China General Composite PMI rose from 51.2 in November to 51.3 in December, amid a pickup in manufacturing sector activity.
Meanwhile, deflationary pressures subsided, with consumer prices increasing 0.2% month-on-month in December after falling 0.1% in November. Notably, producer prices fell 1.9% year-on-year in December, following a 2.2% decline in November, which suggests improving margins.
East Asia Econ recently commented on China’s economy, stating:
“One reason for thinking China’s economy might be bottoming out is the property. For sure, that remains extremely weak. But with property starts down an amazing 75% from the peak, a lot of the negative impact on the economy of the drop in construction has already been seen.”
Notably, the housing crisis has been a key contributor to weak consumer sentiment and a slump in domestic demand. China’s House Price Index fell 2.4% year-on-year in November after declining 2.2% in October. However, the rate of decline eased in late 2025 after sharper declines earlier in the year, suggesting a bottoming out.
Despite improved sentiment, incoming data and Beijing’s monetary and fiscal policy measures will be key in the shorter term.
On Wednesday, January 14, trade data will give insights into the demand environment. Economists forecast exports to rise 3% year-on-year in December, down from 5.9% in November. Stronger-than-expected external demand would likely send Mainland China indices higher.
However, next week’s GDP, retail sales, industrial production, house price data, and unemployment numbers will be crucial. Upbeat figures would reaffirm the bullish outlook over the short to medium term.
Beyond the data, traders should closely monitor signals from Beijing on monetary and fiscal policy.
Considering the current market dynamics, fundamentals and technicals remain aligned, reinforcing the positive outlook.
Key Downside Risks to the Bullish Outlook
However, downside risks remain, potentially unraveling the positive outlook. These include:
- Deteriorating US-China relations and a breach in the trade war truce. This week, US President Trump announced a 25% tariff on nations doing business with Iran.
- Increased global tariffs on Chinese goods. The EU and China are in the midst of reaching a trade deal.
- Beijing delays rate cuts and fresh fiscal stimulus.
- Softer demand for Chinese goods and services would squeeze margins, affecting wage growth, the labor market, and private consumption.
- Chinese housing market crisis intensifies.
Despite these risks, China’s competitiveness in the AI space and increased self-reliance on chip manufacturing reinforce the constructive short- to medium-term bias for Mainland China indices.
Furthermore, markets remain optimistic that Beijing can drive domestic demand through subsidies and lower borrowing rates, while bolstering the housing market.
Medium-Term Outlook: Bullish, Hinged on Beijing
Recent economic data has lifted sentiment toward China’s economy. Fresh stimulus targeting the housing sector, the labor market, and domestic consumption would bolster the economy in 2026.
Given the macroeconomic backdrop and Beijing’s pledges to deliver fresh policy support, the outlook for Mainland China’s indices remains bullish.
CSI 300 Technical Outlook: Resistance Levels in Focus
Technicals and fundamentals remain aligned in early trading on Tuesday, January 13. Viewing the daily chart, the CSI 300 trades above its 50-day and 200-day EMAs, signaling bullish momentum.
A breakout above the January 13 high of 4,821 would open the door to testing 5,000. A sustained move through 5,000 would pave the way toward 2021’s all-time high of 5,931. Holding above the 50-day EMA would be pivotal.
