---
title: "Xiong Yuan: The Great Era of Capex"
type: "News"
locale: "en"
url: "https://longbridge.com/en/news/281184274.md"
description: "This report is from Dr. Xiong Yuan's presentation at the 2026 Guosheng Securities Spring Capital Market Forum, analyzing the impact of the Iranian situation on the global economy. Despite multiple shocks, the global economy has remained resilient since 2021, primarily due to increased Capex, especially in the technology, security, and defense sectors. Taking the U.S. as an example, its GDP grew by 2.1% in 2025, with technology investment contributing significantly and surpassing the influence of traditional consumption"
datetime: "2026-03-31T12:09:36.000Z"
locales:
  - [zh-CN](https://longbridge.com/zh-CN/news/281184274.md)
  - [en](https://longbridge.com/en/news/281184274.md)
  - [zh-HK](https://longbridge.com/zh-HK/news/281184274.md)
---

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# Xiong Yuan: The Great Era of Capex

This content is based on the report delivered by Dr. Xiong Yuan at the 2026 Guosheng Securities Spring Capital Market Forum.

## Content

From a macroeconomic perspective, at the current juncture, the most important task is undoubtedly to analyze the shocks and impacts of the recent Iranian situation. I have been pondering whether the U.S.-Israeli strike on Iran in late February was a sudden event, or something that was not entirely anticipated. **Over the years, has there been a robust framework or a grand narrative that can relatively comprehensively and self-consistently incorporate this conflict into the subsequent analysis of the global economy and market performance?** This is a question I have been contemplating for the past few years.

Looking at the past seven or eight years, the world (including China) has not been peaceful, experiencing many unexpected shocks, including the U.S.-China trade friction in 2018, the public health incident in 2020, the Russia-Ukraine conflict in 2022, and the U.S. imposing reciprocal tariffs globally in April 2025, among others. **Despite multiple shocks to the global economy, it appears that, apart from the relatively unique situation in 2020 which saw a significant decline, the GDP growth rates of major global economies have not experienced a sustained downward spiral since 2021.**

Therefore, we need to consider what logic and factors have enabled the global economy to maintain a relatively strong performance amidst multiple external shocks—its so-called "resilience." I have examined a lot of data and materials, and **one perspective seems to offer a good explanation: over the past seven or eight years, most countries worldwide have continuously increased Capex due to various potential security needs, focusing on three major categories of Capex: technological (AI, power), security-related (energy, resources, industrial chains, supply chains), and defense-related (military industry, military trade). Multi-dimensional data indicates that in recent years, the global economy has maintained strong resilience amidst multiple shocks, primarily supported by these three categories of Capex, which have also shown significant excess returns in the performance of global equity assets.**

**There is data to illustrate that over the past seven or eight years, the global economy has been supported by this round of Capex expansion.** Taking the U.S. as an example, with GDP growth of 2.1% in 2025, from a demand-driven perspective, technological investment represented by AI contributed approximately 0.7 percentage points, the highest proportion historically. Furthermore, in terms of supporting the U.S. economy, technological investment represented by AI has gradually surpassed the impact of traditional consumption.

**China is no different, reflecting the technological competition between China and the U.S.** Similarly, benefiting from the expansion of AI Capex, global power investment has also seen a surge. The phrase "computing power as the foundation, electricity as the king" also aligns with this grand narrative framework.

**The rationale behind "security-related Capex" is also simple: due to various shocks in recent years, countries have increased their focus on energy.** This includes the U.S. actions against Venezuela early in the year, its desire to acquire Greenland, and the various reasons behind striking Iran—all of which undoubtedly involve considerations of resources and energy. China has also increased its investment in energy in recent years and has consistently been the largest energy investor globally.

**Another manifestation of "security-related" Capex is industrial and supply chain security,** particularly after the trade friction starting in 2018, coupled with U.S. reciprocal tariffs and the impact of the public health incident in 2021, which significantly affected global supply chains. In recent years, containers, canals, and ports have frequently become market hotspots, which is also closely related to this. Concurrently, countries have increased **industrial and supply chain restructuring, or the process of re-industrialization,** which has also brought about significant redundant investment.

Regarding defense-related Capex, namely the military industry and military trade, I believe no further elaboration is needed.

**Focusing on the three categories of Capex mentioned earlier—technological, security-related, and defense-related—if we plot the capital market performance of the corresponding sectors, we can observe that these three types of Capex generally correspond to significant excess returns in the market.** In fact, these three categories of Capex have represented the absolute dominant themes in global capital markets over the past few years.

**With such a massive scale of Capex, it clearly requires funding support and necessitates the maintenance of necessary loose fiscal and monetary policies by various countries.** In fact, over the past few years, except for the period when inflation in the U.S. rapidly increased in 2022 and underwent an interest rate hike cycle, major global economies have largely remained in a loose environment for the rest of the time.

**Now, the question arises: with the outbreak of this Iranian war, what will change?** Has the grand narrative just described shifted? As of the day before yesterday (March 23rd), among major assets, crude oil saw the largest increase, while gold and silver saw the largest declines, with other assets in between. Within this broad framework, we may need to consider a topic: what will the U.S.-Iran conflict and the evolving situation in Iran change? **In my view, this U.S.-Iran conflict will undoubtedly further reinforce the security needs I mentioned earlier. On the other hand, due to rising oil prices, regardless of the analytical path or estimation range, a relatively objective short-term outcome is that global inflation will certainly rise, particularly in the United States.**

**The market is already beginning to trade on the possibility that the U.S. may not cut interest rates this year, and even a rate hike is not ruled out.** At the U.S. interest rate meeting on March 19th, discussions included the necessity of a rate hike, though it was considered not a baseline scenario. In other words, if oil prices continue to rise and push up inflation, a rate hike could become an option.

**For many years, a significant support for the global economy has come from Capex expansion, which is underpinned by loose liquidity. If prices continue to rise and liquidity suddenly tightens, it will temporarily press the pause button on this expansion.** Of course, the market has sufficient expectations. In the short term, we need to monitor for potential "stagflation"; if oil prices remain at high levels for longer than expected, a subsequent shift to trading on a potential Global Recession cannot be ruled out.

**Recently, the market has experienced some volatility and adjustments, which already reflect the potential liquidity shock and panic stemming from the rise in oil prices. However, we have not yet seen any large-scale substantive impact on related countries, companies, industries, or individuals due to the higher oil prices.** In other words, current trading mainly reflects the potential impact (expectation) of high oil prices; the actual impact (fact) will be traded subsequently.

This implies that in the coming weeks, some countries may be affected, and the global economy may gradually experience substantive impacts. **Under the baseline scenario, if oil prices remain in the 90-100 range for two to three weeks or longer, the impact of this shock will undoubtedly be significant. In other words, sustained high oil prices are essentially a "Grey Rhino" that has not been fully priced in.**

**For China,** the most direct impact is the rapid rebound in PPI. Based on current trends, the year-on-year PPI is highly likely to turn positive in March, whereas previously, it had been negative for nearly 40 consecutive months.

**When navigating the Chinese capital market this year, whether for stocks or bonds, a very important fundamental change is the trend of prices.** This includes a new change in the Two Sessions that concluded in March: compared to previous years, there is a new addition—to "promote the general price level to turn from negative to positive" in 2026. What does this mean? For the past three years or so, our GDP deflator has been negative. A direct consequence is that while our GDP growth rate has been around 5% in recent years, when including the impact of prices, the nominal growth rate has been around 4%.

However, this year's Two Sessions mentioned a GDP target of 4.5% to 5%, with efforts to achieve better results. In this context, based on current oil price trends and CPI/PPI forecasts, we are likely to see the deflator approach 0 or even turn positive this year, meaning that nominal corporate revenue will be significantly higher than in previous years. From this perspective, I want to remind everyone that when looking at investments this year, whether stocks or bonds, it is crucial to pay close attention to the impact of nominal price chain changes on corporate earnings.

**More importantly, based on this analysis, the current price increase is still primarily driven by supply. Nominal prices will lead to improved corporate earnings, but this improvement will be concentrated more in the midstream and upstream sectors, while downstream consumer industries will be further impacted.** A likely scenario this year is that profit differentiation between industries will become more pronounced, with the upstream sector performing significantly better than the midstream and downstream. The actual impact on the earnings of the midstream and downstream sectors will likely appear with a lag of two to three months.

**Another important factor is exports. The current rise in oil prices may drag down the global economy, leading to a decline in aggregate demand.** For many years, exports have been a support for the Chinese economy. If the impact of the current oil price surge exceeds expectations, exports may come under pressure.

Based on this framework, we need to consider a question: is it possible for the Politburo meeting in April to shift its stance? The recently concluded Two Sessions in March likely did not fully account for the impact of the current oil price surge in its policy expressions and target settings. It is anticipated that the main tone of the April Politburo meeting will be more proactive than that of the March Two Sessions. However, economic data for the first three months will be released in mid-April. Based on the data from the first two months, the GDP growth for the first quarter of this year should be above 4.8%, a significant improvement from the 4.5% in the fourth quarter of last year. Therefore, despite the impact of oil prices, the actual shock to the Chinese economy may be felt from the second quarter onwards. Consequently, it is inclined to believe that the **April Politburo meeting will be relatively proactive in its tone, but the actual measures will likely focus more on preparing incremental policies and policy reserves, and also on preventing potential further economic downturns in the coming months or the second half of the year. A larger-scale stimulus policy is unlikely to be seen in April.**

**Based on these assumptions for market analysis, it is undoubtedly necessary to closely track oil prices.** Returning to A-shares, bonds, and gold, here are a few simple conclusions:

**Regarding the stock market**, based on the logic discussed earlier, as the current high oil price is still a "Grey Rhino" that has not been fully priced in, from my perspective, the market will face short-term pressure. However, **in the medium to long term, it is still expected to exhibit a "slow bull, long bull, healthy bull" market. Chinese assets remain optimistic in the medium to long term.**

**Regarding bonds**, we observe five dimensions: "economic performance, price levels, monetary policy stance, allocation strength, and regulatory strictness." **The most important factor at present is the upward pressure on interest rates caused by rising prices.** In the past, similar crude oil shocks made it difficult for interest rates to decline significantly in the short term. Recently, bond yields in major global economies have hit new highs, while China has remained relatively stable. From the second quarter onwards, as Chinese fundamental pressures truly emerge, and the U.S. government likely restarts more proactive fiscal measures—possibly implementing the so-called "monetization of fiscal deficits" to avoid issues in the midterm elections—**the probability of interest rates declining in the second half of the year remains quite high.**

**Regarding gold**, here is a conclusion: from a macroeconomic perspective, over the past three weeks or so, gold prices have fallen from $5,500/ounce to $4,100/ounce. The biggest influence has come from the oil price shock and the panic caused by the war conflict. This is because the core logic for gold's rise over the past one to two years—a weaker or depreciating dollar—has been temporarily paused. However, this does not mean gold lacks its safe-haven attributes; it is just that the short-term strengthening of the dollar is suppressing its safe-haven properties. We have conducted numerous related studies, and from the current standpoint, **we remain strategically and tactically bullish on gold.** Therefore, if there is a significant adjustment in this round, it remains a positioning opportunity.

Based on the analysis above, if we were to connect the framework before and after this war with a single logical thread: **Over the past seven or eight years, the world has continuously increased Capex driven by various potential security needs, supported by countries' ability and willingness to maintain loose liquidity. Following the current conflict between the U.S., Iran, and Israel, global security needs will be further intensified, and the pattern of loose liquidity will be broken in the short term, although it is likely to remain loose in the long term. Returning to the present, the sustained tension in Iran signals an increased probability of "rising oil prices – rising inflation – Fed pausing rate cuts, or even hiking – increased possibility of stagflation, or even recession" actually occurring. In a word, sustained high oil prices represent a "Grey Rhino" that has not been fully priced in, and one should be alert to subsequent deep market adjustments.**

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