WE Think: 2026 Outlook—Gratitude for the Era, Embracing the Bull Market

Review of 2025: From Trade War Climax to Resolution, the Global Shift to a G2 Era

In 2025, global capital markets far exceeded expectations. China’s major indices—Wind All A, Hang Seng, CSI 300, and ChiNext—rose by 27.65%, 27.77%, 17.66%, and 49.57%, respectively. The S\&P 500 and Nasdaq in the United States gained 16.39% and 20.36%. Markets in Japan, Vietnam, South Korea, the United Kingdom, and Germany also delivered strong performances. Despite the impact of reciprocal tariffs imposed by the United States, global equities ended the year with robust gains. Whether this positive momentum will continue into 2026 remains a key concern for investors as the new year begins.

2025 was an extraordinary year for China. While many traditional sectors continued to feel macroeconomic pressure, strong leadership enabled the country to navigate the turbulence of trade wars and technological blockades with increasing confidence. This review focuses on several pivotal themes: the stabilization of US-China relations, China’s “Sputnik moment” in technology, record-breaking trade surpluses, the resurgence of Chinese assets in global portfolios, and the initial success of proactive equity market policies.

US-China Relations: Stabilization and the G2 Framework

In 2025, US-China relations entered a period of relative stability, marking the formal establishment of a “G2” global structure. Following the inauguration of the new US president, trade tensions escalated but ultimately both sides recognized that “cooperation benefits both, conflict harms both.” By year-end, relations had eased significantly. After eighty years of accelerating globalization since World War II, China’s manufacturing and supply chains have become deeply integrated with the world, making a complete decoupling virtually impossible in the short term. This integration has allowed China to shift from a passive to an active stance in trade disputes.

During negotiations, tariffs were raised to 145% by the United States and 120% by China, signaling the peak and subsequent resolution of the trade war. After several rounds of talks, consensus was reached, making 2025 the inaugural year of stable bilateral relations and the G2 world order. Large-scale conflict between the two countries is unlikely for the foreseeable future.

China’s “Sputnik Moment”: Technology, Trade, and Capital Markets Surpass Expectations

In technology, 2025 marked China’s “Sputnik moment.” The breakthrough by Deepseek—a leading AI research initiative—shocked the global tech community, demonstrating China’s rapidly advancing capabilities. Domestic high-end chip production and computing power localization progressed rapidly, with companies such as HW, Cambricon, Pingtouge, and Kunlun making significant strides. NVIDIA’s market share in China dropped to zero, yet Chinese AI models continued to improve, with Alibaba’s Qwen becoming the world’s most popular open-source model, surpassing Meta’s offerings.

In biopharmaceuticals, global business development (BD) in innovative drugs reached $270–300 billion, with Chinese firms accounting for over $130 billion—nearly half the global total. This reflects not only a surge in volume but also a qualitative leap in China’s pharmaceutical innovation and internationalization.

Record Trade Surplus and Globalization

China’s trade surplus for the first eleven months of 2025 reached USD 1.076 trillion, setting a new global record and making China the first country in history to reach this milestone. The country’s export partners became more diversified, and the share of high-tech products increased, underscoring China’s competitive advantage and successful international expansion strategies. Since the onset of trade frictions in 2018, Chinese enterprises have reformed their global production and supply chains, equipping themselves to handle complex international environments. The “trade war exam” of 2025 was passed with flying colors, boosting confidence across the business sector.

Capital Markets: A New Spring

2025 also marked the beginning of a new spring for China’s capital markets. Investors who patiently held Chinese assets generally achieved solid returns. The market’s mechanisms have matured, enabling rapid and rational adjustment in response to external shocks. After more than a year of bull market conditions, skepticism remains widespread, which helps prevent the recurrence of the 2015 “mad bull” scenario. China’s equity market may now be entering a phase of sustained, moderate growth—a “long bull, slow bull.”

2026 Outlook: Cautious Optimism and Embracing the Bull Market

Looking ahead to 2026, the stability of US-China relations is expected to underpin global stability. Despite ongoing geopolitical tensions, both countries’ leaders plan reciprocal visits, supporting a constructive bilateral environment. The US Federal Reserve is set to appoint a new chair, and a window for monetary easing is opening. High interest rates have strained US government debt, fueling expectations for rate cuts, a weaker dollar, and record highs in commodities such as gold, silver, and copper. However, opinions on US equities are divided, with some citing elevated valuations and increased cash holdings by major investors.

Chinese assets are poised to benefit from RMB appreciation and renewed international portfolio allocations. Foreign institutions are increasingly positive on China, and 2026 may see a trend toward overweighting Chinese assets. The China Investment Corporation (CIC, known as “Huijin”) has increased market participation, a move analogous to the Bank of Japan’s sustained ETF purchases. Such proactive equity market policies have proven effective in stabilizing asset prices, boosting market confidence, increasing household wealth, and stimulating consumption—a virtuous cycle likely to continue.

Technology and Commodities: Supply-Side Driven Bull Market

The bull market in 2026 is expected to be driven by supply-side factors, with technology and growth remaining central themes. AI foundation models, computing infrastructure, chip localization, and other innovation sectors are flourishing. Continuous learning and adaptation are essential for investors to capture opportunities in the new economy. In 2025, commodities saw remarkable gains: silver, platinum, gold, and copper rose by 154.62%, 141.57%, 66.32%, and 41.52%, respectively—a rare historical occurrence. Notably, China has implemented “anti-involution” policies—measures to curb destructive price competition and promote orderly market behavior—in manufacturing, which, along with supply-side reforms in key resource-exporting countries, is expected to support price recovery and improved profitability in midstream industries.

In summary, China’s “slow bull” market is likely to remain vibrant in 2026, with supply-side dynamics as a main driver. Investors should recognize that market cycles are inevitable—sectors will rise and fall, and risk management remains crucial.

Best wishes for health, happiness, and success in the new year!

Wu Weizhi
3, January, 2026

Abu Dhabi

本期《偉志思考》簡體中文版鏈接：

伟志思考：2026年展望--感恩时代拥抱牛市