More and more friends are recently looking into Chinese stocks, and I’ve also spent a lot of time studying this market. To be honest, over a year ago, some people said that China’s stock market had no investment value, but now the situation is completely reversed.

Since September last year, Chinese stocks have been rising continuously. The Shanghai Composite Index broke through 3,950 points to hit a ten-year high, with this rebound approaching a 50% increase. The underlying logic is quite clear — the central bank’s recent policies have been effective, and now the government is guiding insurance companies and funds to increase their stock allocations, aiming to turn China’s stock market into a wealth reserve platform similar to the U.S. stock market.

To understand Chinese stocks, first look at their composition. The five most important indices are the CSI 300, CSI 500, CSI 1000, SSE 50, and the Shanghai Composite Index. Among them, the CSI 300 is the main reference for overseas investors and the most watched. In terms of industry distribution, Chinese stocks mainly focus on finance, electronics, pharmaceuticals, and manufacturing, which makes them particularly sensitive to policies and economic cycles.

Interestingly, the trend of Chinese stocks is quite different from the long-term slow bull run of U.S. stocks. It’s a typical “short bull, long bear, violent surges and crashes” pattern, with strong cyclicality. Since 2010, we can see four distinct phases: 2010-2014 was a period of policy aftereffects, with the market remaining sluggish; 2015-2016 was driven by deleveraging, causing liquidity crises; from 2022 to September last year was a period of turbulence due to weaker-than-expected pandemic recovery. The underlying logic behind this is the cyclical interplay of policies, liquidity, and fundamentals.

Currently, major international banks are optimistic about Chinese stocks. Research reports from Goldman Sachs, JPMorgan Chase, and UBS all believe China’s stock market has entered a more stable upward trajectory, with forecasts of about 30% gains by 2027. They highlight core drivers such as AI technology reshaping profit models, “anti-involution” policies creating new growth space for companies, and China’s manufacturing continued competitiveness.

But risks should also be acknowledged. The current rally is mainly driven by valuation expansion rather than fundamental improvement. The MSCI China Index’s forward P/E ratio has risen from a ten-year average of 11 times to 12.8 times. If macroeconomic recovery falls short of expectations and corporate profits don’t keep pace with valuations, a correction could occur.

For Taiwanese investors, there are two ways to buy Chinese stocks. One is through a custodian trust, with Yuanta, KGI, and Fubon offering options; the other is via overseas brokers, with Futu and Tiger support. Alternatively, you can consider Chinese companies listed in Hong Kong or the U.S., such as Tencent and Alibaba, which are leading giants.

If choosing individual stocks, CATL is an absolute leader in new energy batteries, with the global energy transition providing long-term growth potential. Cambrian has a rare advantage in AI chip design. Among banks, Ningbo Bank has good governance and talent systems. Hengrui Medicine offers irreplaceable value in pharmaceutical industry upgrades. China Mobile may not be as exciting, but its monopoly business provides stable cash flow and high dividends.

Overall, Chinese stocks have indeed entered a new phase. Corporate profits are improving, valuations are recovering, and the long-term allocation value is clearly increasing. But this depends on the economic recovery meeting expectations; otherwise, risks still exist. The most important thing is to allocate according to your risk tolerance and avoid going all-in.