Goldman Predicts a 20% Rally for China Stocks in 2025 Despite a Rocky Start

Goldman Sachs strategists are holding firm on their bullish outlook for Chinese stocks, forecasting a 20% gain in benchmarks by the end of 2025. This optimism comes despite recent market turbulence, including the MSCI China Index entering a bear market last week.

Why Goldman Remains Bullish
Goldman’s strategists, led by Kinger Lau, are overweight on both onshore A-shares and offshore H-shares, citing a favorable risk-reward ratio. They expect sentiment and liquidity to improve in late Q1, fueled by clearer policies on tariffs and domestic support measures.

“The sentiment and liquidity backdrop may begin to improve in late Q1 2025 on better tariff and policy clarity,” the team said in a note.

Sector-Specific Opportunities
Goldman advises investors to focus on:
- Government consumption proxies and emerging market exporters that stand to benefit from a weaker yuan.
- Select technology and infrastructure stocks.
- Overweight positions in online retail, media, healthcare, and newly upgraded consumer services sectors.
Despite the short-term volatility, strategists highlight robust shareholder returns, record-breaking cash distributions, and falling domestic rates as reasons for optimism.

A Challenging Start to the Year
Chinese equities have endured a rough start in 2025. The MSCI China Index has fallen 10% since Goldman’s last optimistic call in November, while the CSI 300 dropped over 5% in the year’s first seven trading sessions, marking the worst start since 2016.

This selloff has been driven by concerns over growth, declining producer prices, and the looming threat of additional U.S. tariffs. However, HSBC analysts echoed Goldman’s sentiment last week, predicting a 21% upside for Hong Kong-listed Chinese stocks amid “favorable policy rhetoric” and an improving economic outlook.

Looking Ahead
While recent market jitters have cast doubt on China’s recovery, Goldman remains confident that policy clarity and a better macroeconomic environment will catalyze a turnaround. As investors position for a potential rally, Chinese stocks could see significant gains by year-end.