Investing in China

4 August 2026, 09:06 UTC Chief Investment Office GWM Investment Research

A broadening opportunity set Investing in China Authors: Yifan Hu, CIO Greater China and Head Macroeconomics APAC, UBS AG Hong Kong Branch; Eva Lee, CFA, Head Greater China Equities, UBS AG Hong Kong Branch; Summer Xia, CFA, CIO Equity Strategist, UBS AG Hong Kong Branch; Kathy Li, CFA, Macro Strategist, UBS AG Hong Kong Branch; Teck Leng Tan, CFA, Strategist, UBS AG Singapore Branch; Delwin Kurnia Limas, CFA, CIO Equity Strategist, UBS AG Singapore Branch; Eve Li, CFA, Credit Strategist, UBS AG Hong Kong Branch; Min Huey Chong, Credit Strategist, UBS AG Hong Kong Branch; Xueqiong Huang, Equity Strategist, UBS AG Singapore Branch

• The July Politburo meeting pledged to step up fiscal execution, while leaving room for additional easing if growth conditions fail to improve

• We stay constructive on China tech, with a focus on semicap and internet. Beyond tech, we also see opportunities in power equipment, health care and high-dividend defensive sectors such as banks, insurers, utilities, and consumer staples.

• We remain constructive on Asian IG and HY, favoring short- to medium-tenor bonds for stable carry and lower rate sensitivity.

• We maintain our constructive view on the CNY and Source: UBS Database continue to rate the currency as Attractive within our Special contribution: global FX preferences. Michael Yang, Investment Writer

This report has been prepared by UBS AG Hong Kong Branch, UBS AG Singapore Branch. Please see important disclaimers and disclosures at the end of the document.

All of these point to a broader and more balanced opportunity set in China, keeping us Attractive on the market.

headwinds and pledged to step up fiscal support A broadening opportunity set in response. The emphasis, however, was on faster implementation of planned easing measures rather than new stimulus. We expect fiscal spending to accelerate in Yifan Hu, Regional CIO & Head Macroeconomics APAC 2H26 following an increase of just 0.8% in 1H26 (at the Eva Lee, CFA, Head CIO Equities Greater China low end of its five-year range), including faster deployment Summer Xia, CFA, Equity Strategist of the CNY 800bn policy-based financial instrument led Kathy Li, CFA, Macro Strategist by policy banks. Government bond issuance could also be ramped up, with around 60% of the CNY 11.9tr full-year In both our global and China mid-year outlooks, we argued quota still unused. that market performance would start to broaden beyond the narrow group of AI hardware leaders that powered first- More importantly, policymakers kept the door open to half gains. Since then, that rotation has become increasingly additional easing if official targets become increasingly evident across Asia-Pacific, with laggards such as MSCI difficult to reach and domestic demand fails to improve. China sharply outperforming North Asian peers amid a With a positive 2H fiscal impulse and resilient exports recovery in internet, consumption, and defensive sectors. cushioning overall growth, we continue to think GDP growth can recover sequentially and stabilize in the mid-4% We expect this broadening of gains to continue. Although range for the year. domestic demand remains soft, the July Politburo meeting explicitly recognized the challenge and left room for additional fiscal easing if growth conditions fail to improve. Government spending lagged in 1H26, despite At the same time, earnings are stabilizing across sectors, better revenue dividend stocks continue to offer appealing income in a low- Genearl government revenue and expenditure as % of annual budget (Jan-Jun) rate environment, and the structural AI story remains intact, with localization efforts and domestic hyperscaler demand still supporting the local hardware supply chain.

All of these point to a broader and more balanced opportunity set in China, keeping us Attractive on the market. Semiconductor equipment remains our top preference within technology, while upcoming 2Q earnings could serve as a re-rating catalyst for large-cap internet names. Beyond technology, we also like power and health care for growth, and banks, insurers, select utilities, and…