China and the People’s Republic of China (PRC) enter 2026 with a familiar but potentially investable setup. Policy support is real and increasingly pragmatic, valuations remain depressed, but domestic demand and the property sector continue to act as key swing factors. The opportunity for investors exists—but 2026 is likely to reward selectivity and earnings discipline rather than broad-based beta exposure.
Unlike major U.S. indices (like S&P 500 or Nasdaq), most large broker forecasts do not publicly publish specific numerical target levels for FTSE China A50 index.
The Singapore based SGX Singapore Exchange: FTSE China A50 Index - China A50 futures market reflects near-term pricing but doesn’t equate to a long-term forecast for China equities.
Instead, China economists and analysts, macro strategists emphasize fundamental drivers (growth, policy, earnings) without explicit point forecasts. Route to market and which China ETF or active fund to invest in can add value to a global investment portfolio that allocates capital to the 2nd largest economy People’s Republic of China.
China 2026 GDP growth may be stronger than expected, with extrapolations above prior consensus — a positive fundamental backdrop for equities.
CHINA IN GLOBAL PORTFOLIOS
Whether a China ETF or a China active fund is “better” for a globally diversified private client investment portfolio, depends on investment goals, risk tolerance, time horizon, and views on China equities
“The iShares China Large-Cap ETF (FXI) remains the largest and most liquid China ETF globally, while MCHI is the preferred benchmark vehicle for broad institutional China exposure.
For global investors, the largest and most widely used China equity vehicle remains the iShares MSCI China ETF (Ticker: MCHI). MCHI is the default institutional China ETF and trades around USD 62 per share in U.S. markets. It offers the largest AUM among broad China ETFs, benchmarking to the MSCI China Index with exposure to offshore China equities and U.S.-listed ADRs.
Despite accounting for roughly 18% of global GDP on a PPP basis, China represents only around 3–4% of global equity indices, highlighting structural underrepresentation.
MACRO EXPECTATIONS
Unlike major U.S. indices, China market forecasts focus more on fundamentals than explicit index targets. GDP growth in 2026 may exceed prior consensus, supported by incremental fiscal support and targeted policy easing.
CHINA MACRO BACKDROP
Policy direction prioritizes boosting domestic demand, stabilizing expectations, and supporting investment through targeted fiscal and industrial policy rather than large-scale stimulus.
VALUATION AND POSITIONING
Chinese equities trade at a deep discount to developed markets on both price-to-earnings and price-to-book metrics. This creates asymmetric upside potential if earnings stabilize and policy clarity improves. Analysts reported that China’s equity valuations are materially cheaper than U.S. or western markets
MSCI China forward P/E with MSCI U.S. and S&P 500 levels:
MSCI China forward P/E: ~11.7x
MSCI U.S. forward P/E: ~20.3x
S&P 500 forward P/E: ~20.5x
This implies Chinese equities are roughly ~40% cheaper than U.S. equities on a forward earnings basis
PROPERTY AND CONFIDENCE
Household confidence remains closely tied to property markets. Stabilization rather than a full rebound would likely support equity re-rating.
EARNINGS MATTER
Policy provides a floor, but earnings growth defines the ceiling. Companies with strong cash flows, balance sheets, and policy alignment are best positioned.
SECTORS TO WATCH
Advanced manufacturing, energy transition beneficiaries, selected consumer defensives, and high-quality Hong Kong–listed China equities.
RISKS
Key risks include property stress, insufficient policy follow-through, geopolitical tensions, and global interest-rate volatility.
CONCLUSION
China equities in 2026 should be approached with selectivity and discipline. A barbell strategy balancing defensive quality with policy-aligned growth may outperform.
Investment in Chinese equities involves material risks and may not be suitable for all investors. While Chinese equities can provide diversification benefits and long-term growth potential within a globally diversified portfolio, they are subject to heightened political, regulatory, economic, and market-structure risks compared with developed markets.
Chinese equities should be viewed as one component within a diversified global portfolio, not as a standalone allocation. Portfolio sizing, vehicle selection, and risk controls should reflect an investor’s objectives, time horizon, liquidity needs, and risk tolerance.
Rainer Michael Preiss
Partner & Portfolio Strategist
Das Family Office, Singapore
