China Musings Policy and macro back to school

Portfolio Strategy Research 16 September 2026 | 12:02AM HKT

Policy and macro back to school

1. It was all about AI for global/China equities for the most part of 2026. But Kinger Lau, CFA | investors’ focus and topicality have recently pivoted (back) to policy and macro Goldman Sachs (Asia) L.L.C.

issues, spurred by the resurging tensions in the Mideast, rising global bond yields and Timothy Moe, CFA | Fed policy, China macro and policy developments. There is also an active political Goldman Sachs (Singapore) Pte event calendar in late September which features President Xi’s potential state visit to Si Fu, Ph.D. | the US and the September Politburo meeting. In this China Musings, we take stock of Goldman Sachs (Asia) L.L.C. these policy and macro issues, refresh our equity market views, emphasize our Kevin Wang, CFA portfolio diversification bias (from AI Hard Tech), and reiterate our preferred | Goldman Sachs (Asia) L.L.C. alpha-generating ideas in a muted beta market, notably A shares (OW), domestic AI vs AI exporters, non-AI opportunities, and specific themes such as Shareholder Returns and IPO strategy.

Exhibit 1: Market focus on AI has cooled somewhat in the past month

(k) Search index on AI 100 BBG news count 100 90 Google search interest - RHS 90 80 Note: Google search interest is a score(0-100) on 80 70 the news search popularity.

Oct-22 Jan-23 Apr-23 Jul-23 Oct-23 Jan-24 Apr-24 Jul-24 Oct-24 Jan-25 Apr-25 Jul-25 Oct-25 Jan-26 Apr-26 Jul-26

Source: Google, Bloomberg, Data compiled by Goldman Sachs Global Investment Research

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2. Oil prices are back up to above the US$100/bbl mark after hovering much around the 80-dollar range in the past couple of months. Supply disruptions in the Persian Gulf are still in place, but the daily oil flows through the Strait of Hormuz and from the Gulf countries are now roughly 40% and 2/3 of the pre-War levels, according to our Commodity strategists’ estimate, supporting their view that Brent should settle at around US$85/bbl by the end of this year, even with the tensions possibly extending into 2027. China (growth) has remained relatively unscathed in this oil shock, thanks to its strategic energy diversification policy (geographically and by energy source), sizable oil reserves, fiscal offset, and robust refining capacity. China’s resilience to oil price volatility has also manifested in the equity space, with Chinese equities exhibiting lower return beta to oil prices than their global peers.

Exhibit 2: China equities are relatively less correlated with oil prices

Major indices correlation with oil price 10% ytd past 2 years past 5 years 0%

-70% MXCN CSI300 SPX NASDAQ EU EM-ex-China

Source: FactSet, Goldman Sachs Global Investment Research

3. Bond yields in developed economies and certain EMs are at multi-decade highs on inflation, fiscal sustainability, AI (capex) crowding out concerns. On policy rates, following a firmer-than-expected August CPI/PCE print released last Friday, our economists added a 25bps hike to their base-case Fed Fund Rate forecast in the September FOMC meeting. Tightening of financial conditions globally typically bodes ill for Asian equities, but our analysis shows that the speed of (real) rate increases tends to matter more than simply the level of rates. With the neutral rate in the US still likely trending towards 3%, and the growth/inflation profile potentially improving over the medium term on GS projections, the September hike, if it materializes, should not be a significant performance roadblock to Chinese equities, the offshore market in particular, for which equity duration has shortened and pricing is at what we view as below-fair valuation levels. Importantly, onshore rates have been an outlier in the recent bond market correction, with the 10-year CGB yields hovering at their all-time lows, at 1.7%. This implies that equity risk premium for A shares is at the high-end of the recent-year range, and that Chinese assets are a decent place to look for diversification.