Goldman Sachs' Liu Jinjin: International Investors' Interest in Chinese Stocks May Have Peaked in Recent Years

Goldman Sachs’ Chief China Equity Strategist Liu Jinjin stated on March 24 that international investors’ interest in Chinese stocks may have risen to recent highs, with only about 10% of surveyed clients considering the Chinese stock market “uninvestable,” a significant improvement from around 40% two years ago. Amid escalating geopolitical tensions in the Middle East and soaring energy prices, Liu Jinjin said Goldman Sachs maintains a bullish recommendation on Chinese stocks (A-shares and Hong Kong stocks) and believes that the Sharpe ratio from A-shares will be higher in the short term.

“Our conversations with U.S. investors also confirm this trend. They are eager to discuss topics such as AI, the implementation of ‘anti-involution’ policies, the trend of Chinese companies going global, and the potential rebound of consumer-related stocks, along with their investment implications.” Liu Jinjin believes that part of the reason U.S. investors are rekindling interest in the Chinese market is that, given the potential further depreciation of the dollar, high policy uncertainty in the U.S., and elevated valuations of U.S. stocks, they have a need to diversify outside U.S. assets.

Liu Jinjin stated that currently, there is a significant gap between overseas investors’ interest in Chinese stocks and their actual allocations, with room for improvement. Data on actual holdings show that international investors remain cautious about Chinese stocks, with hedge funds’ net exposure to China hovering around cyclical midpoints. Long-term asset managers, especially sovereign wealth funds and pension funds from emerging markets and Belt and Road countries, have shown strong interest in China’s stock market. For example, during the recovery of the Hong Kong IPO market, foreign cornerstone investors’ participation rate reached a cyclical high of 25%.

“From the perspective of the impact of oil supply shocks on regional economies’ real GDP growth and inflation rates, China is less sensitive to oil price shocks than other emerging Asian economies,” Liu Jinjin said. Although China is a net importer of oil and natural gas, its actual exposure to disruptions in the Strait of Hormuz is less than what overall import dependence suggests. Additionally, China’s energy consumption structure relies less on oil and natural gas compared to other major economies, further weakening the transmission of domestic inflation.

Liu Jinjin noted that AI remains the most discussed theme in Chinese stock investments. China is an indispensable part of the global AI landscape, accounting for 10% of the global AI market value and 16% of revenue. However, global mutual funds are significantly underallocated to Chinese AI stocks; as of January 2026, Chinese AI stocks only accounted for 1.2% of their global technology stock allocations. He believes China has competitive and comparative advantages in the global AI supply chain, especially in infrastructure, power, and semiconductors. “Chinese AI is not a bubble. We estimate that the potential economic benefits from AI, driven by efficiency gains and new profit creation, could be 50% to 100% higher than what current AI stock prices reflect.” He also remains optimistic about companies that prioritize and are committed to delivering shareholder returns, expecting that cash returns from Chinese listed companies could reach a new high of about RMB 4 trillion by 2026.