Morgan Stanley Chief Analyst on China's Narrative in Geopolitical Games: A-shares Are Expected to Further Attract Global Capital

Recently, the 2026 Morgan Stanley China Conference was held in Shenzhen.

During the event, Morgan Stanley China’s Chief Economist Xing Ziqiang and China’s Chief Equity Strategist Wang Ying were interviewed by a reporter from Caixin Global.

在 the backdrop of the continued escalation of geopolitical conflicts in the Middle East, severe volatility in global energy markets, and inflationary pressure rising again, Xing Ziqiang said from a macro perspective that he is optimistic about the resilience of China’s economy after the industrial reshuffling that follows “avoiding over-saturation in internal competition (involution).” He also expects government measures to boost consumption. Wang Ying, meanwhile, pointed out from a strategy perspective that the A-share market has a stronger ability to withstand volatility, that the high-end manufacturing industry chain contains abundant opportunities, and that it is well positioned to further attract foreign capital inflows.

Both of the two foreign-investor chiefs emphasized overseas investors’ attention to the Chinese economy. Xing Ziqiang noted that Shenzhen has gathered a large number of technology companies and boasts a rich and complete industrial chain. This year’s Morgan Stanley China Conference was specifically held here. This is also the first time that a conference previously held for many years in Hong Kong and Beijing has been moved to Shenzhen, with the goal of making it easier for foreign-investor clients to conduct on-site investigations into the competitiveness of China’s industrial chain.

“Interest from foreign investors in Chinese assets and in China’s stock market has increased in all directions. Foreign investors have already seen China’s irreplaceable position in the global high-end manufacturing industry chain.” Wang Ying said that this irreplaceability is no longer just a price advantage, but rather the irreplaceability of products and quality, as well as China’s absolute advantages in the technology sector.

Under the “East Stabilizes, West Whipsaw” pattern, energy security brings resilience to China’s economy

When assessing the current global geopolitical landscape, Xing Ziqiang continued his earlier view that the world is showing a pattern of “East stabilizes, West whipsaws.”

He said that the so-called “the East rises and the West falls” may be overly simplified; “East stabilizes, West whipsaws” is a more accurate description. The continuity and effectiveness of China’s policies stand in sharp contrast to the growing policy uncertainty in the West.

Specifically, the United States faces a wide range of policy unpredictability, from tariffs and immigration to central bank independence, among others. Coupled with Europe’s vulnerability amid the energy crisis, Western economies appear to be wavering amid turbulence. China has a complete industrial system and strong policy resolve. This kind of “steadiness” is itself a scarce asset in a world that is in turmoil.

Regarding the Middle East conflict that is continuing to build momentum, Xing Ziqiang broke down in detail the transmission mechanism from a surge in oil prices to the global economy. He modeled three scenarios:

With the conflict quickly cooling down, oil prices in 2026 would stay at $80–90;

If the parties continue to tug of war, oil prices will hover around above $100;

In extreme cases, oil prices could soar to $150–180; under this scenario, demand would be compressed to the limit, dealing a recessionary blow to the global economy.

Xing Ziqiang expects that, based on the current outlook, the probability of extreme scenarios occurring is not high. In the future, oil prices may remain at elevated levels for the long term, at $80–90 and possibly even above $100.

Based on this judgment, Xing Ziqiang believes China has three advantages: its layout over the past decade-plus in green power (wind, solar, hydro, and nuclear), its unique finished-petroleum- product pricing mechanism, and its significantly lower dependence on imported oil and gas than Asian economies such as Japan, South Korea, and India. Even if it faces some input-driven inflation, China’s economy still has relatively strong resilience.

“Under non-extreme scenarios, this conflict may in fact become an opportunity for China’s industrial upgrading. China’s domestic economy is not without challenges—boosting consumption is an important one.” Xing Ziqiang believes the view that “as long as we do well in technology and industries, consumption will naturally get better” does not hold water. China’s current main contradiction is not insufficient capacity, but rather the coexistence of excess capacity and insufficient domestic demand. Real “anti-involution” requires releasing consumption potential through reforms to the social security system.

He suggests transferring more of state-owned asset returns into the social security fund, especially to address shortfalls in social protection for migrant workers and farmers. Only by enhancing the sense of gain among lower- and middle-income groups through “redistribution” can consumption be boosted and healthy ground be provided for technological innovation.

A-shares are expected to further attract foreign capital inflows, focusing on tangible assets and high-end manufacturing

Regarding the performance of China’s A-share market this year, Wang Ying first offered a clear view: the bull market in 2025 has already completed valuation repair, and 2026 will be a year of stepping up into steadiness.

In this process, the investment strategy of digging for alpha becomes especially important.

“From the beginning of the year to now, the performance of A-shares appears weak, but that is partly due to a technical mismatch in index construction. In the major benchmark indices, heavyweight companies’ weights are too high, masking the excellent performance of many real-economy industries such as energy, industrials, and semiconductors.” Wang Ying said. Given that the growth rate of earnings for the whole market is expected to be in the single-digit range, investors may shift from expecting broad-based gains at the index level toward focusing on structural opportunities in individual stocks and sectors.

“Among the three types of Chinese equity assets—A-shares, Hong Kong stocks, and China concept stocks listed in the U.S.—around the period before and after this year’s Spring Festival, we have already suggested that investors place most of their funds in the A-share market.” Wang Ying said. As for the source of A-shares’ resilience, she believes that the strong capacity of the national team’s funds acts as a stabilizer. In addition, compared with Hong Kong stocks and China concept stocks, which are constrained by overseas liquidity and highly volatile geopolitical conditions, the A-share market has stronger policy independence and certainty. This kind of policy predictability becomes particularly important in a context where geopolitical risk premiums rise.

Wang Ying noted that China’s high-end manufacturing industry chain competition has long moved beyond low-price involution. Relying on a complete industry-chain layout, the advantages of irreplaceable products, and hard-core technological barriers, it continues to consolidate global competitive advantages. In a multipolar global order, from 2025 to 2030, China’s global export share of high-end processing industries is expected not to decline but to rise—projected to increase by 1 to 2 percentage points. Moreover, given the evolution of the geopolitical situation today, this optimistic outlook still has room to be upgraded.

Based on the logic of geopolitical security and self-reliant, controllable industrial chains, Wang Ying offered clear sector allocation recommendations:

First, go long on tangible assets, focusing on sectors including raw materials, industrial goods, semiconductors, energy, and also power generation, energy storage, and transmission—along with machinery manufacturing related to energy efficiency and safety. These areas not only benefit from supply-chain restructuring amid global geopolitical conflicts, but also concentrate China’s irreplaceable competitive strengths within global industry chains.

Second, remain cautious about consumption. Wang Ying clearly stated that before domestic demand truly and substantially recovers, consumer stocks are more of a defensive attribute rather than an offensive one.

Overseas investors such as Middle East sovereign wealth funds are seeking a safe haven

Both chiefs pointed out that global investors’ attention to the Chinese economy and market is increasing.

Xing Ziqiang said that choosing Shenzhen to host this year’s conference is intended to bring some overseas clients, major sovereign funds, pension funds, and investors to Shenzhen, so they can see that the Yangtze River Delta? Actually Pearl River Delta?—(珠三角) industry in Shenzhen already has an ecosystem that integrates upstream and downstream. From cutting-edge embodied intelligence technology to the energy revolution, green transition, lithium batteries, and new energy vehicles, and even to communications 6G networks, quantum technology, brain-computer integration, and bio-manufacturing—China has the potential for industry-chain cooperation and providing solutions.

“Over the past few years, a batch of star companies has emerged in areas such as hard technologies, high-end manufacturing, and bio-pharmaceuticals, and many of these companies have already listed on A-shares. International investors, while conducting in-depth research on these companies, have also significantly increased their interest in the A-share market.” Wang Ying added at the same time that, as the “petrodollar” cycle gradually loses its mystique, sovereign wealth funds in the Middle East and elsewhere have begun seeking diversification in asset allocation. With a stable macro environment and unique, rich advantages in tangible assets, China is gradually becoming the “new frontier” for global capital.

Xing Ziqiang said that in the next wave of technological revolutions such as AI and embodied intelligence, China and the United States will present a “G2” pattern. The United States relies on compute power—“big effort makes wonders happen”—while China relies on leading infrastructure and a massive dividend of engineers, taking a path of algorithm optimization with high cost-effectiveness.

“This kind of differentiation solidifies China’s indispensable position in the global technology landscape. At the same time, China is a stable anchor amid geopolitical storms, but internally it still needs to activate domestic demand through social security reforms.” Xing Ziqiang said.

（Source: Caixin Global）