Recently, watching the performance of the Mainland China stock market is truly quite interesting. Since September last year, the Shanghai Composite Index has risen by nearly 50%, which has drawn attention in a market that many investors had previously been quick to criticize. What’s especially interesting is that major international firms such as Goldman Sachs and JPMorgan have recently released optimistic signals about the Mainland China stock market, even predicting there is still around 30% upside in the next few years.

To be frank, the logic behind the Mainland China stock market is worth taking a deeper look at. This market only started in 1990, so compared with the U.S. stock market it is still quite young, yet its price-action characteristics are very distinct—typical “a short bull and a long bear, with sharp rallies and sell-offs.” Historically, it has gone through several bull markets driven by policy stimulus, as well as rapid collapses caused by leverage. But this time seems different, because there is a more solid logic supporting it.

The Mainland China stock market is mainly driven by three factors: liquidity, policy, and fundamentals. This rebound is closely tied to the central bank’s supportive policies; however, more importantly, corporate earnings are beginning to improve. Factors such as AI applications, “anti-involution” policies, and the overseas expansion of manufacturing are working together, and the expected earnings per share growth rate is around 12%. With valuation still having room to recover, this forms a relatively complete logic for the upward move.

If you want to participate in the Mainland China stock market, the first step is to understand its market structure. Most crucial is the CSI 300 Index, which is the main reference for overseas investors. In addition, there are the SSE 50 (large-cap stocks), the CSI 500, and the CSI 1000 (small-cap stocks), each with its own characteristics. In terms of sectors, the Mainland China stock market is mainly focused on finance and electronics, pharmaceuticals, and manufacturing. It also has a high correlation with economic policies and the business conditions of the manufacturing industry.

For investors in Taiwan, there are mainly two ways to buy Mainland China stocks. One is through a nominee trading arrangement (QFII-style cross-border custody), and brokers such as Yuanta and KGI all support this. The other is via overseas brokers—platforms like Futu and Tiger Brokers also make it possible. When choosing, you should look at the platform’s strength, the convenience of depositing funds, and trading smoothness, and it’s best if the platform also supports Chinese-language services. Moreover, many high-quality Mainland China companies are listed in Hong Kong and the U.S.; Tencent and Alibaba are also good options.

From an investment perspective, large leading companies such as CATL and China Mobile are relatively safer due to solid fundamentals and abundant cash flow. Cambricon has technical advantages in the AI chip field, while Hengrui Pharmaceutical has scarce value amid the pharmaceutical upgrade trend. But keep in mind that the current rally is driven more by valuation expansion than by improvements in fundamentals. The P/E ratio of the MSCI China Index is already higher than the ten-year average value, so risks do exist—if macroeconomic recovery underperforms expectations and corporate earnings cannot keep up, the market may face a pullback.

In summary, the long-term allocation value of the Mainland China stock market is indeed increasing, but in the short term, investors need to be cautious about the risk of valuations being overstretched. For investors who want to participate, they can consider building positions in stages and focus on leading companies whose fundamentals are truly improving.