by LIU Ting

Foreign investor interest in China is picking up, with capital rotating from other emerging markets as the economic outlook improves and valuations remain low, Fitch Ratings said.

Jeremy Zook, Fitch's China sovereign ratings chief, told Jiemian News on Tuesday the shift is driven by economic recovery, stronger corporate fundamentals and relatively cheap A-share valuations.

Fitch in March raised its 2026 China GDP growth forecast to 4.3% from 4.1%, citing stronger exports. Customs data showed exports rose 14.7% year on year in dollar terms in Q1, faster than the full-year pace in 2025.

Despite geopolitical tensions, China's energy system remains resilient, said HUANG Xiaoting, senior director for Asia-Pacific corporate ratings at Fitch. Diversified crude imports, large inventories and state-owned firms help stabilize supply, while domestic fuel pricing controls limit the pass-through of global oil prices to consumers.

Fitch said oil could average around $70 per barrel in 2026 if tensions ease, rising to about $100 under a three-month disruption, or $130–$170 in extreme scenarios. Prices are unlikely to return to previous lows in the near term.

Zook said China's exports remain robust despite U.S. tariffs, as firms diversify markets and benefit from lower costs and a weaker real effective exchange rate.

He added that China may be nearing the end of deflation. The GDP deflator fell just 0.06% in Q1, close to turning positive, while producer prices returned to growth in March after 41 months of decline.

Higher energy costs are likely to lift inflation in the near term, though they may weigh on corporate margins.