Morgan Stanley: China's "steady" economy itself is becoming a scarce asset

Ask AI · How does China’s energy transition lay a solid foundation for the economy?

The partial conflict in the Middle East has entered its second month, and the cloud of oil supply crisis continues to cast a shadow over the global economy, with risk assets experiencing intense volatility. However, in this round of shockwaves, China has demonstrated a more resilient stance than other Asian economies, attracting the attention of global capital.

At the recent Morgan Stanley China Investment Summit held in Shenzhen, Economist Xing Ziqiang pointed out: “Resilience” itself is becoming a scarce asset.

In response to the external optimistic narrative of “East rising and West declining,” Xing Ziqiang offered a more cautious and precise judgment — “East stable, West turbulent.” This summary not only affirms China’s relative advantages in assets but also avoids overly simplified binary opposition.

China’s asset resilience is not accidental but built on three solid foundations. First, ample strategic crude oil reserves provide a critical buffer for energy security; second, a unique refined oil pricing mechanism effectively cushions end-user price shocks through fiscal and quasi-fiscal measures; third, and most importantly, the energy structure transformation over the past decade has significantly reduced dependence on imported oil and gas. Renewable energy now accounts for half of electricity generation, complemented by self-sufficient coal as a cornerstone, making China less exposed and more resilient to Middle Eastern oil and gas fluctuations compared to other Asian economies.

Xing Ziqiang is even more optimistic, predicting: “Under non-extreme scenarios (where oil prices do not trigger a global recession), China’s industry will instead usher in an ‘upgrade’ opportunity.” “China possesses globally leading monopolistic competitiveness in wind energy, photovoltaic equipment, and raw materials, which is expected to further expand its share in the global market, turning crises into opportunities.” He estimates that China’s share of the global export market will rise from about 15% currently to around 17% by 2030.

Against the backdrop of ongoing chaos in the Middle East, the call for “capital to flow eastward” is growing. Xing Ziqiang analyzes that, in the short term, Middle Eastern investors tend to be cautious; but in the medium to long term, the unpredictability of the U.S. in immigration, tariffs, monetary policy, and unilateral interventions is prompting sovereign funds, pension funds, and other “big global money” to reassess over-concentration in dollar assets. China’s assets are expected to gradually benefit from this process.

In terms of investment tools, consider deploying during dips into China’s core asset index — the CSI 300, which covers leading Chinese industries such as new energy, electricity, rare earths, and technology manufacturing. These companies have solid fundamentals, high dividend yields, and serve as long-term holdings for domestic and foreign institutions, as well as the first choice for “semi-hedge” funds during extreme market conditions. Related ETFs include the CSI 300 ETF by Huaxia (510330.SH), which has a large scale, better liquidity, and the lowest management fee rate of 0.15% per year. Off-market fund investors can also consider dollar-cost averaging into Huaxia CSI 300 ETF Connect C (005658.OF), which has no subscription fee and no redemption fee after holding for more than 7 days.

Daily Economic News