As China transitions from the conclusion of its 14th Five-Year Plan ( FYP ) into the inaugural year of the 15th FYP ( 2026–2030 ), experts from Fidelity Investments and BNP Paribas Asset Management ( BNPP AM ) paint a picture of cautious optimism.

The National People’s Congress is expected to formalize the 15th FYP’s specific growth targets next month ( March ), which, according to a report by BNPP AM entitled "Chi on China" published on February 4, are anticipated to double down on “new quality productive forces”.

Amid global trade tensions and domestic challenges like property downturns, Beijing’s strategic pivot towards high-tech innovation and domestic demand signals a path to sustainable growth, potentially averting fears of “Japanification”. This shift could unlock fresh opportunities for investors in equities and bonds, though selectivity remains key.

The 15th FYP, according to BNPP AM’s report, emphasizes three mutually reinforcing pillars – boosting domestic demand, ensuring macroeconomic stability and enhancing national security.

President Xi Jinping’s framework prioritizes self-sufficiency in technology and strategic supply chains, moving away from traditional export-led and investment-heavy models. “This is not about massive reflation,” notes Chi Lo, BNPP AM’s senior economist. “Instead, policy focuses on ‘new quality productive forces’ – such as high-tech sectors like artificial intelligence ( AI ), robotics, electric vehicles ( EVs ), semiconductors and biotechnology – to create high-value jobs, raise household incomes and reduce precautionary savings.”

Fidelity’s outlook aligns with BNPP AM, forecasting China’s GDP growth at around 4.5% to 5% annually through 2035 to achieve “mid-level developed country” status.

In their China outlook webinar held on Febuary 4, Peiqian Liu, Fidelity’s Asia economist, highlights resilient exports despite US tensions, with diversification to Africa and Latin America doubling since 2019, although imports have stabilized, reflecting weaker domestic demand and a maturing industrial supply chain.

Liu anticipates modest inflation recovery, with the producer price index on an upward trajectory due to anti-involution efforts and credit demand. Fiscal policy is expected to maintain a 4% deficit target, but with more spending on social welfare, education and human capital, shifting from infrastructure to services-driven growth.

This transformation addresses structural headwinds, including employment pressures from property sector job losses, as Fidelity notes positive spillovers from manufacturing upgrades, with rising shares of high-tech jobs.

BNPP AM echoes this, arguing that net exports have dragged on GDP growth over half the time since 2009, underscoring domestic demand’s role. Research and development spending has surged, nearing US levels since the 2018 trade war, fuelling disruptive innovations like commercial space tourism, a private firm’s plan to send tourists to space’s edge by 2028 exemplifies this ambition.

For investors, these dynamics bode well for Chinese equities although Stuart Rumble, Fidelity’s head of Asia-Pacific equities, cautions that 2025’s 20% to 30% gains in A-shares and Hang Seng were valuation-driven, not earnings-led.

In 2026, investors must expect dispersion, Rumble says, with growth sectors like industrials ( robotics, batteries, EVs ), AI/cloud ( Tencent, Alibaba ), healthcare ( innovative drugs ) and niche consumption ( sportswear, travel ) expected to deliver 12% earnings per share growth.

“Valuations remain undemanding relative to global peers,” Rumble says, “with P/E [price-to- earnings] ratios in five-year ranges.”

BNPP AM sees upside in self-sufficiency plays, such as semiconductors, where production has accelerated post-trade war. However, risks persist, particularly geopolitical “chokepoints” in tech supply chains could spur decoupling, while property stabilization relies on local policies.

Fidelity remains underweight on property developers but sees marginal gains in tier-1 cities’ strong players.

On bonds, opportunities shine in credit. Fidelity views Chinese government bonds as diversifiers, offering yield pickup when hedged to US dollars in a low-inflation environment. Offshore credit stands out, with lower issuance and yields several points higher than onshore, amid supportive liquidity. Spreads are tight, but could compress further as corporate balance sheets improve in tech and gaming.

Military modernization’s 1.7% GDP spending, BNPP AM warns, could heighten regional tensions, but bolster defence-related sectors.

International investors, wary after recent under allocations, Rumble notes, may return if geopolitical stability holds and earnings materialize. US Federal Reserve rate cuts could ease People’s Bank of China constraints, benefiting exporters and domestic demand, although “stock selection is crucial” amid high dispersion.

Overall, China’s prospects hinge on executing this innovation pivot, potentially grinding markets higher. With strategic reforms, the Year of the Horse, starting on February 17, could see China gallop towards resilience, creating a boon for patient investors in high-tech equities and yield-rich bonds.