As China enters the Year of the Horse, investors are again asking whether the animal’s attributes of powerful, dynamic energy are a fair reflection of how Chinese assets are poised to perform. Compared with 2014 – the last Year of the Horse – China now represents a fundamentally different economy and investment destination.
For investors in Chinese equities and fixed income, 2026 brings a combination of cyclical opportunity and structural recalibration. The anticipated release of the 15th Five-Year Plan in March, evolving attitudes towards market stability, rapid progress in cost-efficient artificial intelligence and continued leadership in sustainability will shape the landscape. China’s relationship with the US and its deepening ties with emerging markets also remain important external variables.
Compared with the last Year of the Horse in 2014, China’s markets are more mature and resilient. The boom-and-bust cycle of 2014–2015 has given way to a more institutionalised equity market, with greater participation of professional and institutional investors, both domestic and international.
Wenchang Ma, Portfolio Manager, China Equity: “China in 2026 is fundamentally different from the China of 2014: more institutional, more stable and more innovation driven.” Regulatory frameworks have evolved towards more market-friendly outcomes, with greater emphasis on predictability. While confidence was tested during bouts of regulatory tightening in recent years, market structures today are considerably stronger.
China’s real economy has also materially changed. In 2014, the property market accounted for close to 30% of economic activity and exports around one-quarter. Today, both figures have declined meaningfully, replaced by domestic innovation-led growth supported by sustained investment in research and development. “The Chinese economy is increasingly defined by advanced manufacturing, automation, renewable energy, semiconductors and applied artificial intelligence. These sectors benefit from both domestic demand and export potential, broadening the country’s growth base..” said Ma.
This structural transformation has investment consequences: it should be reflected in demand for both A-shares – which primarily reflect domestic sentiment – and H-shares, which serve as a gauge of international interest in Chinese stocks.
The evolution since 2014 is equally stark in fixed income. China today effectively offers investors two distinct bond markets: the onshore renminbi-denominated market, which is anchored by the government bond curve, and the more volatile offshore US dollar credit market, which spans investment grade and high yield.
Alan Siow, Co-Head of Emerging Market Corporate Debt: “Equities and fixed income now tell divergent but complementary stories, with onshore bonds offering stability and offshore credit offering selective value.”
The onshore bond market increasingly functions as a defensive allocation within global portfolios, offering diversification and low correlation to developed bond market rates. Offshore investment-grade credit has been supported by domestic demand, while high yield — particularly property-related issuers — continues to reflect more cautious sentiment. “Offshore credit presents higher-risk, higher-reward potential for investors willing to tolerate greater volatility and policy uncertainty,” Siow added.
Furthermore, China’s onshore bond markets are deep and liquid enough to support growing Asian regional and intra-EM capital flows as financial integration across the region continues to gather pace.
Sentiment appears to have passed its trough, and the upcoming Five-Year Plan – due for formal release and approval in March – could provide additional support, particularly if it signals renewed policy commitment to stabilising growth and financial conditions.
Siow: “China’s 15th Five-Year Plan will be a key anchor. Current indications point to focus on higher-quality growth, industrial modernisation and moving further up the manufacturing value chain. Innovation remains central, particularly in areas where China seeks to preserve or extend competitive advantage, such as advanced manufacturing, clean energy and technology localisation. Rebalancing supply and demand is another key theme, with measures intended to gradually lift household consumption. For equity investors, this points towards a slower but potentially more sustainable consumption recovery. For fixed income, it reinforces the emphasis on stability over aggressive stimulus.
Policymakers acknowledge that earlier regulatory tightening was often uncoordinated, even if well intentioned. Messaging has become more supportive of private enterprise, and there is greater awareness of the market impact of sudden policy shifts. While regulatory risk has not disappeared, it has become more predictable. Stability is increasingly recognised as a public good, particularly given the role of capital markets in supporting innovation and employment.
“Equity valuations in several areas still reflect excessive pessimism, especially given improved regulatory clarity and earnings growth,” said Ma.
Artificial intelligence is one of the most consequential themes shaping China’s outlook. China’s approach is notably cost-efficient and commercially focused. Chinese AI companies operate under capital constraints that force efficiency and rapid monetisation. Breakthroughs are often revealed through products rather than press releases, as illustrated by the viral emergence of DeepSeek through app-store adoption rather than promotional campaigns. This has broader implications.
“If China can achieve meaningful productivity gains from AI without the enormous infrastructure spending seen elsewhere, it offers a lower-cost model that is particularly attractive to emerging markets. AI then becomes a levelling force, allowing economies with fewer resources to leapfrog stages of development,” said Siow.
Furthermore, China has a structural advantage in power supply. It is adding more renewable-electricity capacity each year than its total demand growth, creating abundant and cheap clean energy for data centres and AI applications.
China’s strategic direction has implications beyond its borders. ASEAN economies are absorbing labour-intensive manufacturing, while Chinese clean-technology exports — particularly batteries and renewable-energy components — are expanding rapidly into emerging markets, reinforcing China’s role in shaping global decarbonisation pathways.
US-China relations will remain unpredictable, but the economic relationship has already adapted. China’s exports to emerging markets now exceed those to developed economies, reducing reliance on the US consumer. Despite tariffs and trade barriers, total exports have continued to grow, supported by improved efficiency, automation and product competitiveness rather than price alone.
Taken together, China enters the Year of the Horse with a stronger emphasis on endurance than speed. Today, it is more institutional, more stable and increasingly driven by innovation. “The overarching theme is not a return to the exuberance of 2014, but a more measured and durable advance,” Ma concluded.