by JIANG Yiman

Goldman Sachs said signs of a gradual, earnings-led bull market are emerging in Chinese equities, forecasting gains of about 38% by the end of 2027, as earnings growth, modest valuation recovery and policy support align.

In a report on its China equity strategy, the bank said momentum is being supported by AI-related advances, shifts in consumer demand, deeper overseas expansion by Chinese firms and more targeted policy backing, alongside continued inflows from domestic and foreign investors.

Goldman expects returns to be increasingly driven by actual earnings growth, forecasting profit growth of 14% in 2026 and 12% in 2027, with around 10% scope for valuation expansion. It said the market is moving away from sentiment-led trading toward fundamentals.

Artificial intelligence could lift Chinese corporate earnings by about 3% a year over the next decade, Goldman said, through productivity gains, cost savings and new revenue streams. Despite a recent rebound, valuations in China's AI sector remain attractive relative to U.S. peers, it added.

On consumption, the bank said overall demand is likely to remain stable in 2025, while spending continues to upgrade structurally, with services and newer consumption categories not fully reflected in official data providing support.

Goldman has reiterated an overweight stance on A-shares and H-shares, recommending buying on dips. It has also said a large pool of sideline liquidity has yet to enter the market, which could provide further upside, particularly for small- and mid-cap stocks — a factor it sees as making the current setup more resilient than in past cycles.