Chinese Markets Reach Four-Year Highs Driven by AI Sector Growth
New York, Wednesday, 7 January 2026.
Chinese stocks hit four-year highs as Goldman Sachs forecasts a 20% upside for 2026, driven by surging AI earnings while US futures momentarily pause.
Diverging Market Momentum
As of Wednesday, January 7, 2026, global equity markets are displaying a notable divergence in momentum. While stock index futures in the United States are stabilizing following a record-breaking rally for the Dow Jones Industrial Average [1], Chinese equities have surged to levels not seen in years. On Tuesday, the benchmark CSI 300 Index advanced 1.6% to close at its highest level in four years, while the Shanghai Composite Index rose 1.5% to close at 4,084 [3][5]. This resurgence is being driven by a potent combination of policy support, liquidity measures from Beijing, and a renewed fervor for the artificial intelligence sector [5].
Goldman Sachs Forecasts 20% Upside
The optimism surrounding Chinese equities is underpinned by bullish projections from major financial institutions. Goldman Sachs has forecast that the MSCI China Index could see a surge of 20% in 2026, with the mainland-listed CSI 300 Index projected to increase by 12% [2]. Crucially, analysts note that these gains are expected to be driven by tangible earnings growth rather than merely speculative valuation increases. Corporate profits are projected to grow by as much as 14% this year, a significant acceleration compared to the single-digit growth observed in 2025 [2]. This shifting landscape suggests a favorable risk-reward scenario for investors, particularly as valuations remain undemanding despite the improved outlook [2].
AI Earnings Fueling Optimism
The technology sector remains the fulcrum of this market recovery, with artificial intelligence serving as the primary catalyst. Goldman Sachs predicts that internet and hardware companies will report year-on-year profit growth of approximately 20% in 2026, driven by the monetization of AI technologies and related capital spending [2]. This trend is exemplified by industry heavyweights like Alibaba, whose stock price was more than 90% higher at the beginning of December 2025 compared to the start of that year [6]. Furthermore, Nvidia CEO Jensen Huang stated in November 2025 that China would ultimately ‘win’ in artificial intelligence, bolstering confidence in the region’s technological capabilities [6].
Broader Economic Recovery and Geopolitics
Beyond the technology sector, the current rally reflects broader confidence in China’s economic trajectory. Carmakers are expected to potentially double their profits this year, rebounding from a low base in 2025 [2]. The market’s resilience is further evidenced by investors’ ability to set aside significant geopolitical concerns; the rally occurred even as global markets processed news of a US attack on Venezuela over the weekend [5]. With the Shanghai Composite reaching its strongest level since July 2015 and the Shenzhen Component climbing 1.4% to 14,022 [3][5], the data suggests that liquidity injections and property sector stabilization measures are finally gaining traction, positioning 2026 as a potential turnaround year for the world’s second-largest economy.