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In the fourth quarter, major economic data in China indicates that the macro cycle still faces certain challenges. The decline in fixed asset investment has widened, and future investment stabilization is expected to rely on policy support. Additionally, in terms of consumption, the support from trade-in programs has weakened, compounded by the disruptions from &#34;Double Eleven,&#34; leading to a slowdown in consumption growth. On the other hand, supply-side reforms have somewhat alleviated the pressure of low prices and corporate profits in China. Overall, we believe that the continued downturn in real estate is leading to weak overall demand, and the structure of strong supply and weak demand still needs improvement. Recent economic data may indicate an increasing necessity for stronger policies; the market also anticipates a coordinated policy effort to continue supporting growth.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82d7f39a-3b5a-4e68-8824-2a44ffe953a7.jpeg?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/82d7f39a-3b5a-4e68-8824-2a44ffe953a7.jpeg"/>
In the fourth quarter, the decline in real estate investment has widened, and investments in infrastructure and manufacturing have also declined.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7293b344-7561-4132-bfd5-6a110978c1b5.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7293b344-7561-4132-bfd5-6a110978c1b5.png"/>
Data source: Wind, HSBC Private Banking and Wealth Management (as of December 26, 2025)
China's PPI has narrowed its decline since August, while CPI turned positive starting in October.
<img src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7710a02d-37a8-486c-9004-37b1a83f63ae.png?x-oss-process=image/auto-orient,1/interlace,1/resize,w_1440,h_1440/quality,q_95/format,jpg" alt="" original-src="https://imageproxy.pbkrs.com/https://wpimg-wscn.awtmt.com/7710a02d-37a8-486c-9004-37b1a83f63ae.png"/>
Data source: Wind, HSBC Private Banking and Wealth Management (as of December 26, 2025)
Note: CPI refers to the Consumer Price Index; PPI refers to the Producer Price Index.
The positive policy tone from the Central Economic Work Conference on December 10-11 and the Central Political Bureau meeting on December 8 aligns with market expectations. The meetings objectively analyzed the development situation facing the Chinese economy, expressed positivity regarding policies for stabilizing growth, and affirmed the long-term trend of structural transformation. Furthermore, the meetings effectively addressed several topics of high market concern, including domestic consumption, investment, the real estate market, and anti-involution governance. We believe that this Political Bureau meeting and the Central Economic Work Conference balance growth and reform, with relatively positive statements regarding economic and market policies. We will also closely monitor the implementation of policies and their impact on the economic fundamentals.
Although economic data and market trends have diverged, policy support and ample liquidity may continue to support the stock market in 2026. Looking ahead to 2026, we believe that the valuation re-evaluation driven by innovation in the Chinese stock market is likely to continue, and the upward momentum for stocks is expected to shift from valuation recovery in high-performing sectors to profit improvement
We remain optimistic about the Chinese stock market and maintain a barbell strategy that balances offense and defense. First, supported by policies, we firmly believe in the profit improvement of technology stocks under the dual background of independent innovation and going abroad. Second, we balance technology stock allocation with dividend assets, especially high-dividend quality central state-owned enterprises, which may provide important downside protection. In addition, low positions, low expectations, and low valuations form a protective cushion for the overall consumer industry, and we are optimistic about local new consumption opportunities supported by policies.
Profit Growth Forecast for China's A-Share Technology Sector in 2026
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Data source: Wind, HSBC Qianhai Securities, HSBC Private Banking and Wealth Management (as of December 26, 2025). Forecasts are subject to change.
We believe that the onshore bond market in China should seek structural support amid range-bound fluctuations in 2026. The impact of fundamentals on bond pricing is expected to increase, with key variables possibly being the level of inflation. Overall, the policy combination of &#34;steady fiscal strength and moderately loose monetary policy&#34; remains favorable for next year's bond market. Therefore, from a medium-term perspective, we hold a neutral view on China's onshore bond market, believing that there is still room for reserve requirement ratio cuts and interest rate reductions. The monetary trend may benefit the yield outlook of Chinese local currency bonds, and the mixed economic data also reduces the risk of rising bond yields. The term spread may remain at relatively high levels, and the yield curve is expected to steepen, so we maintain a preference for medium- to short-duration varieties.
Yield Changes for Various Maturity Types
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Data source: Wind, HSBC Private Banking and Wealth Management (as of December 23, 2025). Y: Year
Note: The views on Chinese stocks in this article come from HSBC Private Banking and Wealth Management Global Investment Committee.
Data source: Bloomberg, Wind, HSBC Global Investment Research, HSBC Private Banking and Wealth Management. Past data does not represent future performance.
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The above content is from HSBC China Wealth Insights. For more content, click on [HSBC China Wealth Insights Column].
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In the fourth quarter, China's economy faces challenges, with a slowdown in fixed asset investment and consumption growth, and an expanded decline in real estate investment. Supply-side reforms have improved low prices and corporate profit pressures. The Central Economic Work Conference emphasizes policy support and structural transformation, with the market expecting a coordinated policy effort to support growth. Despite the divergence in economic data, ample liquidity may continue to support the stock market in 2026, with expectations that the market will be driven by innovation-driven valuation reassessment and profit improvement

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HSBC China Wealth Insights: Promoting Growth and Reforming Simultaneously, Policy Support and Ample Liquidity Continue to Support the Market | China Perspective