#China #Beijing #Capital Market #Yan Xiang #Founder Securities

The Resilience of China's Capital Markets

In recent statements, Yan Xiang, the Chief Economist at Founder Securities, has provided an in-depth analysis of the current state of China's A-share market. Despite facing recent fluctuations, Yan remains confident about the long-term prospects of this economic sector, attributing its resilience to strategic capital market reforms.

Key Factors Influencing China’s Market

Yan outlines five significant factors that contribute to the growing appeal of Chinese equities:

1. Growing Technology Presence

One of the most influential changes in China's capital market has been the increase in technology firms entering the A-share market. With platforms like the STAR Market, ChiNext, and the Beijing Stock Exchange becoming more prominent, these venues now account for nearly 80% of new listings since 2024. As a result, the technology, media, and telecommunications (TMT) sector now comprises over 25% of the total market capitalization. Notably, companies developing alternatives to imported technologies are gaining traction, making the A-share market increasingly technology-centric.

2. Recovering Corporate Earnings

As of the end of October 2026, the majority of companies listed on the Shanghai and Shenzhen exchanges reported positive earnings results for the first three quarters. Approximately 73% of these firms posted profits, contributing to a remarkable RMB 56.6 trillion in combined revenue and RMB 5.1 trillion in net profit. This represents growth rates of 5.8% and 8.5% year-on-year, respectively, marking the highest figures since 2022. Notably, sectors such as artificial intelligence and innovative pharmaceuticals have shown astronomical profit growth, suggesting the market is rebounding strongly.

3. Attractive Equity Valuations

Investor sentiment is buoyed by the fact that valuations across major A-share indices now reflect reasonable levels both in absolute numbers and historical context. Certain stocks have even dipped to historical lows. For example, the CSI 300 index, trading at a price-to-book ratio of 1.3x and the Wind All-A index at 1.6x, falls into the lowest percentiles of their historical ranges. Thus, many consider the current market conditions to present significant opportunities for investment.

4. Stronger Shareholder Returns

Commitments to increasing shareholder returns have become more pronounced, with companies implementing robust dividend policies and share buybacks reflective of improved corporate governance. In 2026, listed companies have contributed RMB 2.1 trillion in dividends and share repurchases combined, which is a noteworthy increase compared to funds raised through IPOs and refinancing within the same period.

5. Continued Market Reforms

At the recent Annual Conference of Financial Street Forum 2026, CSRC Chairman Wu Qing highlighted critical reforms aimed at enhancing market stability and inclusivity. Plans to introduce more balanced investment and financing roles in capital markets are set to further attract local and international investors. Yan believes these adjustments will bolster confidence in Chinese equities, ensuring a healthy influx of capital.

Conclusion

The insights from Yan Xiang indicate that, despite the present volatility, the long-term outlook for China’s capital markets remains optimistic. The convergence of technological advancement, recovering earnings, attractive valuations, commitments to shareholder returns, and ongoing reforms collectively serve to secure a resilient future for China's financial landscape. Investors should remain aware and responsive to these changes as they explore opportunities in this dynamic market.