23 November 2025 | 11:24PM HKT Economics Research CHINA DATA INSIGHTS Our Revamped Investment Tracker Shows Recent Plunge in Fixed Asset Investment Overstated The China Economics Team Investors should consider this report as only a single factor in making their investment decision. For Reg AC certification and other important disclosures, see the Disclosure Appendix, or go to www.gs.com/research/hedge.html. Chelsea Song +852-2978-0106 | chelsea.song@gs.com Goldman Sachs (Asia) L.L.C. Lisheng Wang +852-3966- ...

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Investment Rating - The report maintains a positive outlook on various sectors, with specific "Buy" ratings for companies such as AIA Group, ASMPT, Atour, Hengrui, Sunny Optical, Tencent, and others [13][14][28][33]. Core Insights - The 15th Five-Year Plan (FYP) emphasizes technological innovation, consumption rebalancing, and building a strong domestic market, which are expected to drive growth in sectors like technology, healthcare, and renewables [14][29]. - The report anticipates a stable external environment for China, with net exports remaining a key growth driver despite potential challenges from high bases and external demand uncertainties [7]. - The healthcare sector is highlighted as a key beneficiary of government policies, with a focus on innovation and globalization, particularly in medical devices and pharmaceuticals [29]. - The consumer sector is shifting towards experience and service consumption, with a growing emphasis on well-being and the silver economy, indicating potential growth areas for companies in these segments [27]. Economics - The report projects a growth target of around 5.0% YoY for 2026, with a focus on policy continuity and structural support for consumption [7]. - The RMB exchange rate is expected to become a focal point, with potential for significant movements as trade tensions ease and internationalization efforts continue [7]. Commodities - The report notes a shift in China's commodity fundamentals due to economic transitions, with a focus on domestic demand and energy self-sufficiency [9][10]. - The Action Plan for the Nonferrous Metals Industry indicates a shift towards high-quality growth, with supply growth expected to remain constrained [9]. Sector Views - **Autos and Parts**: The sector is poised for growth driven by advancements in Robotaxi and ADAS technologies, with key players expected to benefit from commercialization efforts [19]. - **Banks**: The banking sector is expected to outperform due to positive earnings growth and attractive dividend yields, particularly among large H-share banks [22]. - **Brokers**: The report highlights a trend of households reallocating wealth into equities, benefiting brokers as market proxies [26]. - **Consumer**: Key investment themes include a shift towards experiential consumption and a focus on well-being, with specific companies identified as top buys [27][28]. - **Healthcare**: Innovation and globalization are seen as critical drivers, with a focus on companies with strong pipelines and global expansion capabilities [29]. - **Insurance**: The sector is viewed positively, with opportunities arising from comprehensive enhancements across various business lines [33]. Top Buys - The report lists several top buy recommendations across sectors, including AIA Group, Hengrui, Tencent, and Anta, among others, indicating strong growth potential and favorable market conditions [13][14][28][33].

Summary of Key Points from the China Macro Tour Conference Call Industry Overview - **Industry**: Chinese Economy - **Event**: Citi's 2025 China Macro Tour held in Beijing on November 3rd–4th, attended by approximately 20 investors, including former policy advisors, think tank representatives, industry participants, and regulators [1][4] Core Insights and Arguments 1. **Overall Sentiment**: There is a slight improvement in sentiment compared to previous tours, but policy expectations remain muted with no significant breakthroughs anticipated [5][6] 2. **Growth Target**: A consensus exists around maintaining a growth target of "around 5%" for 2026, although some participants suggest it could be lowered to "around 4.5%" due to demographic challenges [6][8] 3. **Consumption Rebalancing**: The necessity for consumption rebalancing was acknowledged, with a target of increasing the consumption ratio by one percentage point annually, requiring government support equivalent to 0.7% of GDP [7][8] 4. **Cyclical Policy Expectations**: Expectations for cyclical policies are low, with potential rate cuts limited to 10-20 basis points in 2026 and a sustained fiscal deficit at 4% [8][9] 5. **Industrial Policies and AI**: A new approach to industrial policies is deemed necessary, focusing on future industries and the role of private companies. Concerns about AI's impact on productivity and job losses were raised [10][11] 6. **External Risks**: Participants expressed cautious optimism regarding external relations, particularly with the US, while acknowledging ongoing strategic rivalry [12][13] 7. **Exports Outlook**: Most participants expect a smaller but positive contribution from net exports in 2026, driven by structural factors despite concerns over external demand [14] 8. **Consumption Rebalancing**: There is a strong consensus on the need to lift consumption, but structural tools to achieve this have not yet shown meaningful progress [15][16] 9. **Housing Market Sentiment**: Sentiment regarding the property sector has worsened, with expectations of continued downturn, particularly in tier 3 and 4 cities [17][18] 10. **RMB Appreciation**: There is a consensus among participants for RMB appreciation, driven by economic fundamentals and the need for RMB internationalization [21][23] Additional Important Insights - **Policy Constraints**: Long-standing constraints on monetary and fiscal policies remain, with concerns about local officials' incentives and the effectiveness of current measures [9][10] - **Inflation Outlook**: Participants expect marginal improvements in PPI and GDP deflator in 2026, but negative numbers may persist [20] - **Housing Policy**: There is skepticism about the effectiveness of current housing policies, with calls for more demand-side measures [22] - **Anti-involution Policies**: Participants do not view anti-involution as a significant solution to current economic challenges, indicating a need for more comprehensive strategies [19][22] This summary encapsulates the key takeaways from the conference call, highlighting the current state and outlook of the Chinese economy as discussed by various participants.

Financial Distress - Property tycoon Michael Fuchs is in a "perilous" financial state with debts exceeding $250 million [1] Legal Issues - Michael Fuchs' ex-wife is seeking his imprisonment for violating a court order related to their contentious divorce [1]

Summary of the Conference Call on China Strategy Industry Overview - The focus is on the Chinese equity market, specifically the MSCI China index, which has bounced back 80% from its cycle lows in late 2022, despite facing four significant drawdowns [1][10][26]. Core Points and Arguments 1. **Market Outlook**: A sustained uptrend for China equities is anticipated, with key indexes expected to rise approximately 30% by the end of 2027, driven by a 12% trend profit growth and a 5-10% potential re-rating [1][11][12]. 2. **Bull Market Mentality**: Investors are encouraged to shift their mindset from selling during rallies to buying on dips, as the bull market unfolds. An alpha-centric approach is recommended, focusing on specific themes such as Chinese Prominent 10, AI, and small-cap A-shares [3][20]. 3. **Policy Environment**: The pro-market policy window is open, with several measures taken to support equity markets, including demand-side stimulus and easing regulations for private enterprises (POEs) [6][13][27]. 4. **Growth Drivers**: Key growth themes include advancements in AI, the anti-involution campaign, and the trend of Chinese companies going global, which are expected to enhance earnings growth [14][18]. 5. **Valuation Metrics**: Current valuations are considered inexpensive, with index PEs at mid-cycle levels and significant discounts to global equities. The fair multiple for H- and A-shares is projected to rise, indicating that investors are not overpaying for potential growth [15][27]. 6. **Capital Flows**: There is a structural migration of capital towards equities, with an estimated Rmb6 trillion potential asset reallocation from other sectors to the stock market in the coming years [18][28]. 7. **Risks and Corrections**: While the outlook is positive, cyclical macro slowdowns and external risks may lead to profit-taking and corrections. However, unless these risks intensify, the recommendation is to stay invested and accumulate during corrections [19][20]. Additional Important Insights - **Historical Context**: The Chinese equity market has experienced significant volatility, with a notable downturn from early 2021 to late 2022, during which over US$6 trillion was lost. The recovery has been marked by four major corrections averaging 22% [10][26]. - **Regulatory Changes**: The easing of regulations on POEs is seen as a critical factor in reviving investor confidence and stimulating growth in the stock market, where POEs represent 60% of the total market capitalization [13][27]. - **Shareholder Returns**: Record-high dividends and buybacks are projected, with yields expected to reach approximately 3%-3.3% of current prices by 2025/2026 [28][36]. This summary encapsulates the key insights and projections regarding the Chinese equity market, highlighting the anticipated growth, supportive policies, and the importance of strategic investment approaches.

Economic Growth - The Chinese economy grew at 4.8% in the July-September quarter, marking the slowest annual pace in a year and aligning with analyst expectations, attributed to trade tensions with the U.S. and weak domestic demand [1][7] - This growth rate is a decline from 5.2% in the previous quarter, representing the weakest quarterly growth since Q3 2024 [1] Trade Tensions & Export Data - Despite U.S. tariffs, China's overall exports remained resilient, with global exports increasing by 8.3% in September, the fastest growth in six months, while exports to the U.S. fell by 27% year on year [2] Property Sector & Consumer Weakness - The ongoing property market crisis in China has negatively impacted consumption and domestic demand, with residential property sales dropping by 7.6% in value during the first nine months of the year compared to 2024 [3] Future Projections - S&P projects new home sales to decline by another 8% year over year in 2025 and by 6-7% in 2026, indicating continued weakness in the property sector [4] - The World Bank predicts China's economy will expand by 4.8% in 2025, while S&P Global economists forecast GDP growth to slip to 4% year on year in the second half of 2025 [7] Monetary Policy Outlook - To address the slowing economy, China may implement policy easing, with Goldman Sachs suggesting a 10-basis-point cut in the key rate and a 50-basis-point reduction in the reserve requirement ratio [5][6] - The central bank's easing stance is seen as a response to deflationary pressures and the need to stimulate growth [6] Investment Opportunities - If rate cuts occur, high-growth tech stocks and ETFs such as KraneShares CSI China Internet ETF (KWEB) and Invesco China Technology ETF (CQQQ) may benefit, along with iShares China Large-Cap ETF (FXI) and iShares MSCI China ETF (MCHI) [8] - Despite subdued retail sales momentum, FXI and MCHI have advanced approximately 23% and 28% over the past six months, indicating potential for further growth with any policy stimulus [9]

Summary of Key Points from the Conference Call Industry Overview - The report focuses on the Chinese economy, particularly the industrial production, fixed asset investment, and retail sales sectors, as well as GDP growth forecasts for 2025 and 2026. Core Insights and Arguments 1. **GDP Growth**: China's Q3 GDP growth moderated to 4.8% year-on-year (yoy) from 5.2% in Q2, slightly above market consensus of 4.7% but in line with forecasts. Sequentially, GDP growth showed a slight acceleration to 1.1% quarter-over-quarter (qoq) non-annualized in Q3 from 1.0% in Q2 [1][10][20]. 2. **Industrial Production**: Industrial production (IP) growth rose significantly to 6.5% yoy in September, exceeding expectations, driven by stronger exports and increased auto output. Sequentially, IP gained 1.4% month-over-month (mom) non-annualized in September [3][13][20]. 3. **Fixed Asset Investment (FAI)**: FAI growth remained depressed at -0.5% year-to-date (ytd) yoy in September, with a notable single-month decline of -6.7% yoy. This was attributed to ongoing "anti-involution" policies and a prolonged downturn in the property sector [8][14][20]. 4. **Retail Sales**: Retail sales growth slowed to 3.0% yoy in September from 3.4% in August, impacted by weaker offline sales and the fading effectiveness of the consumer goods trade-in program. Online sales showed slight improvement [9][15][20]. 5. **Services Sector**: The Services Industry Output Index remained stable at 5.6% yoy in September, indicating resilience in the services sector despite challenges in retail sales [16][20]. 6. **Property Market**: The property market continued to show weakness, with significant year-on-year declines in new home starts (-14.4%) and property sales (-10.5% in volume) [11][18][20]. 7. **Unemployment Rates**: The nationwide unemployment rate decreased slightly to 5.2% in September from 5.3% in August, although youth unemployment remains a concern at 18.9% for the 16-24 age group [19][20]. Adjustments to Economic Forecasts - Full-year real GDP growth forecasts for 2025 and 2026 have been raised to 4.9% and 4.3%, respectively, reflecting adjustments based on Q3 GDP outcomes and historical data revisions. The growth target of "around 5%" for the year remains on track despite US-China tensions [1][20][37]. Additional Important Insights - The effectiveness of existing easing measures is diminishing, necessitating targeted easing to ensure stable growth and employment in the coming quarters [20]. - The majority of recent easing measures' growth impulses are expected to materialize in late 2025 or early 2026 [20]. This summary encapsulates the key points from the conference call, providing a comprehensive overview of the current state of the Chinese economy and its outlook.

Group 1: Trade Developments - President Donald Trump announced an additional 100% tariff on Chinese imports, effective November 1, 2025, escalating the ongoing trade war between the U.S. and China [2][9] - The tariff is a response to China's new export controls on critical rare earth minerals and software, indicating a significant shift in trade relations [2] Group 2: Market Reactions - The cryptocurrency market experienced its largest decline in 2025, with Bitcoin dropping by 8.4% to $104,782, resulting in an estimated $19 billion loss across the crypto market [3][9] - Asian equity markets are expected to suffer, with the Hang Seng Index projected to drop by 2.5% at market open, reflecting investor concerns [4][9] - Major Chinese technology companies, including Alibaba and Tencent, are anticipated to see significant declines in Hong Kong trading [4][9] - China Vanke shares are forecasted to fall by as much as 4.6% following the resignation of its chairman, impacting the real estate sector [4][9] Group 3: Central Bank Actions - The People's Bank of China injected 137.8 billion Yuan into the market through 7-day reverse repos at a rate of 1.40%, aiming to stabilize the financial system amid trade uncertainties [5][9] - The central bank fixed the USDCNY reference rate at 7.1007, a stronger fixing than the previous rate of 7.1048, indicating efforts to support the yuan [5][9] Group 4: Geopolitical Context - Canadian Prime Minister Mark Carney participated in a Gaza Peace Summit in Egypt, highlighting ongoing geopolitical developments [6][9] - France's newly appointed Prime Minister Sebastien Lecornu unveiled his cabinet amid domestic political turmoil, which has affected French bond futures and the euro [6][9]

Market Performance - The ASX experienced a significant gain of +1.3%, driven by strong performances in the Materials sector, which rose by +2.1% due to new all-time highs for gold [2][3] - The rally in the market is attributed to uncertainty in the U.S. regarding a potential government shutdown, which historically leads to stock surges [3] Top Performers - Gold miners and explorers led the market, with Westgold Resources (ASX:WGX) increasing by +7.6%, Bellevue (ASX:BGL) up by +3.6%, and Tambourah Metals (ASX:TMB) soaring by +57% [4] - BHP Group (ASX:BHP) and Rio Tinto (ASX:RIO) also saw gains, despite challenges from China's attempts to lower global prices [4] - CSL Ltd (ASX:CSL) rebounded with a +3.3% increase, benefiting from the overall sector performance [4] - Dart Mining (ASX:DTM) reported a remarkable +100% increase according to ADVFN.com [5] Underperformers - St George Mining (ASX:SGQ) was a notable underperformer, declining by -46.7% [6] - REA Group (ASX:REA) lagged after acquiring a controlling stake in Planitar, and News Corp (ASX:NWS) also saw a dip [6] - DroneShield (ASX:DRO) experienced a significant drop of -15% [6]