Fundamental Foundation, China Assets Bloom Globally: Strong Resonance from HK to A-Shares

Introduction

Since 2026, global capital markets have experienced multiple disturbances, with intertwined risk factors such as geopolitical games, major central bank monetary policy uncertainty, and inflation stickiness. However, against this complex macro background, China assets have shown remarkable resilience and vitality. Both the continuous climb of the HK Hang Seng Index and the steady rise of major A-share indices have attracted global investors' attention. The market is generally concerned: is this round of upward trend driven by short-term sentiment or supported by deep logic? The answer has gradually become clear: China's economic fundamentals are continuously improving, which is the core driving factor behind the comprehensive strength of China assets. This article will deeply analyze the underlying logic of current China asset performance from multiple dimensions including macro recovery trend, industrial policy dividends, capital flows, and market structure optimization.

I. Economy Recovery Shifts from 'Quantity' to 'Quality': Fundamentals Strengthen Market Foundation

Long-term market performance ultimately returns to economic fundamentals pricing. In the first half of 2026, China's economy continued the stabilizing and recovery trend since the second half of 2025, with GDP growth maintained in a reasonable range and growth quality significantly improved. From the demand side, consumption, as the main engine of economic growth, has recovered faster than expected. Total retail sales of consumer goods grew at over 5% year-on-year for several consecutive months, with new formats such as service consumption, digital consumption, and green consumption performing particularly well. Consumer confidence has gradually recovered against the backdrop of stable employment and improved income expectations, with domestic demand's contribution to economic growth significantly increasing.

Investment structure also shows positive changes. Manufacturing investment, especially high-tech manufacturing investment, maintains double-digit growth, reflecting enterprises' firm commitment to technology upgrading and capacity optimization. Infrastructure investment remains stable driven by accelerated special bond issuance and the implementation of major projects under the '14th Five-Year Plan', with the proportion of new infrastructure (5G, data centers, charging piles, etc.) continuing to rise. Although real estate investment is still in a bottoming phase, marginal improvement signals have emerged with the sustained efforts of 'guaranteeing building delivery' policies and support from urbanization structural demand.

In foreign trade, despite challenges such as rising protectionism in the global trade environment, China's exports remain resilient thanks to its complete industrial chain system, product competitiveness, and diversified market layout. In particular, exports of 'new three items' (electric vehicles, lithium batteries, photovoltaic products) continue to grow rapidly, becoming highlights of foreign trade growth. The trade surplus remains at a high level, providing strong support for RMB exchange rate stability and foreign exchange reserve security.

Key data highlights: In the first half of 2026, total profits of industrial enterprises above designated size turned from negative to positive year-on-year, and industrial capacity utilization rebounded above the average of recent years, indicating that the operational efficiency of the real economy is improving. Meanwhile, PMI has been in expansion territory for several consecutive months, and the services PMI has been continuously in a high boom range, confirming the comprehensiveness and coordination of economic recovery. These solid macro data are the firmest 'anchor' for capital market valuation repair.

II. Policy 'Combination Punch' Works: Reform Dividend and Steady Growth Resonate

The improvement in fundamentals is not accidental; it is backed by precise and sustained macro policies. Since 2026, China's fiscal policy has focused more on 'improving quality and efficiency,' with tax and fee reduction policies further tilting toward small, medium and micro enterprises and tech innovation enterprises, significantly reducing the burden on the enterprise side. Monetary policy adheres to 'self-oriented,' while maintaining reasonable liquidity, structural tools (such as science and technology innovation relending, carbon emission reduction support tools) guide financial resources to key areas. The optimization of credit structure has kept social financing growth stable, and the financing cost of the real economy has fallen to a historical low, providing a loose monetary environment for enterprise investment expansion.

It is particularly noteworthy that the capital market itself is undergoing deep reforms. On the HK side, measures such as further lowering listing thresholds to attract new economy companies, optimizing connect mechanisms, and improving market liquidity continue to advance. The A-share market has fully implemented the registration system, strengthened information disclosure supervision, optimized the delisting system, and a market ecology of survival of the fittest is taking shape. These institutional changes have significantly enhanced the appeal of China assets to long-term capital, especially to foreign institutions that focus on corporate governance and transparency.

In addition, the strategic foresight of industrial policies cannot be ignored. Frontier fields such as artificial intelligence, semiconductors, biomedicine, and new energy have received sustained top-level support, with national industrial funds, tax incentives, and research investments forming a joint force. These industries are precisely the most growth-oriented and valuation-elastic sectors in current China assets, and are also important directions for attracting global capital allocation to China. The resonance between policy and industry makes China assets not just 'a rising tide lifts all boats,' but a 'structural value reassessment.'

III. Capital Flows Confirm Confidence: Foreign and Domestic Funds Resonate

Behind the rise in asset prices is the result of funds voting with their feet. Recently, turnover in both HK and A-share markets has increased significantly, with both northbound and southbound funds showing net inflows. Foreign institutions' allocation attitude toward China assets is undergoing a positive change. On one hand, China's relative advantages among major global economies are prominent: higher growth, lower inflation, and more policy space. On the other hand, the narrowing of China-US interest rate spreads and stable RMB exchange rate expectations have also reduced foreign exchange risk considerations for foreign capital.

Many international investment banks have recently upgraded their ratings for Chinese stocks, believing that China assets are currently at historical low valuations while earnings expectations are being revised upward. This combination of 'valuation trough + earnings repair' is very attractive in global market comparisons. From an industry perspective, foreign capital's increased allocation focuses on consumption leaders, tech leaders, and high-dividend blue chips. Meanwhile, domestic public funds, insurance funds, and pension funds are also entering the market in an orderly manner, forming a favorable situation of foreign and domestic resonance.

Notably, the HK stock market, as a bridge connecting China and the world, often has leading indicator significance. The rise of the Hang Seng Index and Hang Seng Tech Index not only reflects pricing of China's economic fundamentals but also embodies the preference of capital flows under global liquidity rebalancing. State-owned enterprises, red chips, and internet giants in the HK stock market, with stable profitability and high dividend yields, have become the preferred direction for capital allocation.

IV. Opportunities in Structural Divergence: Embracing a New Paradigm for China Assets

Current performance of China assets is not a broad-based rally, but shows clear structural divergence. Industries and companies with solid fundamentals and certain growth enjoy higher valuation premiums, while those lacking core competitiveness and weak profitability remain under pressure. This divergence is precisely a manifestation of market maturity improvement and the inevitable result of investors returning to value investing.

Looking ahead, the main investment lines of China assets will revolve around three logics: first, consumption upgrade and demographic shift, with long-term stable demand in silver economy, healthcare, and education services; second, technological self-reliance and industrial security, with broad domestic substitution space in key areas such as semiconductors, industrial software, and high-end equipment; third, green development and social responsibility, where the new energy industry chain and energy-saving and environmental protection technologies will continue to receive dual policy and market impetus under the carbon neutrality goal. Meanwhile, the high-dividend strategy still has allocation value in the rate-cutting cycle, and the governance improvement and dividend increase brought by state-owned enterprise reform will also enhance market appeal.

For investors, understanding the core logic of China assets has shifted from simple 'cyclical gaming' to 'structural growth + reasonable valuation.' Those enterprises that can ride out economic cycles and have moats will continue to receive market favor.

Conclusion

From HK stocks to A-shares, the recent excellent performance of China assets is by no means an accidental market event but an inevitable reflection of the continuous improvement of China's economic fundamentals. Solid macro growth, precise policy regulation, deep institutional reform, and abundant capital inflows have jointly built a solid foundation for this round of market movement. Although global markets may still face volatility in the future, China assets, with their relatively strong fundamentals, low valuations, and huge domestic demand market, have medium- to long-term allocation value. Investors should maintain stability, discard short-term noise, closely follow the main line of economic transformation and industrial upgrading, select quality targets, and share the era dividends of China's high-quality development.

We have reason to believe that with the further consolidation of economic recovery and the continuous deepening of reform and opening up, the status of China assets in global capital markets will become increasingly important, and their appeal and influence will reach a new level.