GuShiio.com: International investment banks and institutions’ analysis of China’s economy and stock recommendations in February 2025

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In February 2025, major international investment banks and institutions were generally cautiously optimistic about China’s economic growth expectations. Deutsche Bank predicts that China’s GDP will grow by 4.8% in 2025, 4.6% in 2026, and is expected to grow by more than 5% in the first quarter of 2025. Shan Hui, chief China economist at Goldman Sachs, said that as local government debt reduction work relieves local financing pressure and enables fiscal expansion, government consumption and investment may accelerate growth.

China’s economy needs structural adjustments to achieve sustainable growth. On the one hand, it is necessary to increase support for emerging industries and promote the transformation and upgrading of traditional industries; on the other hand, it is necessary to strengthen environmental protection and resource conservation to ensure the sustainability of economic development.

China’s economy is still fluctuating under the influence of population aging, real estate adjustment cycle and private sector balance sheet adjustment. Private demand shows the characteristics of structural contraction, residents’ willingness to save is high, and consumption and investment growth slows down or even shrinks.

Views of major institutions

Goldman Sachs

• Economic growth expectations: Goldman Sachs Chief China Economist Shan Hui said that as local governments’ debt reduction work relieves local financing pressure and enables fiscal expansion, government consumption and investment may accelerate growth.
• Stock market outlook: Goldman Sachs maintains its overweight rating on the MSCI China Index, predicting that the index will rise 14% this year, and even 28% under optimistic expectations. Goldman Sachs also pointed out that A-shares have a relatively high weight in hard technology, but have also been actively deploying AI application fields in recent years. Therefore, A-shares will also benefit from the development of AI soft technology, and stocks in the soft technology field will be more ahead of the market.
• Recommended stocks and reasons: It is recommended to pay attention to related stocks in the technology field, such as SMIC, because with the development of AI technology, the demand for chips will continue to grow. As a leading domestic chip manufacturer, SMIC is expected to benefit from this trend.

Deutsche Bank

• Economic growth forecast: Deutsche Bank predicts that China’s GDP will grow by 4.8% in 2025 and 4.6% in 2026, and is expected to grow by more than 5% in the first quarter of 2025.
• Stock market outlook: Deutsche Bank emphasized that 2025 will be the year when Chinese companies rise globally, and the phenomenon of discounted valuations of Chinese stocks will disappear. The bull market cycle of A-shares and Hong Kong stocks has started in 2024 and is expected to continue and exceed previous highs.
• Recommended stocks and reasons: It is recommended to pay attention to Midea Group because of its strong performance in overseas markets, excellent growth in its own brand home furnishing business, and stable development of industrial and commercial solutions, which are expected to boost the company’s continued growth in the future.

Bank of America

• Economic growth expectations: Bank of America strategists expect that after the US stock market stops rising continuously in early 2025, its lead will continue to fade.
• Stock market outlook: It is recommended to go long on Chinese stocks because the trade and technology wars are not expected to escalate.
• Recommended stocks and reasons: We recommend to pay attention to Juhua Co., Ltd., because as a leading company in the refrigerant market, it has significant scale advantages and market influence, and is expected to continue to maintain its leading position in the industry.

UBS

• Economic growth expectations: UBS believes that the rise of DeepSeek has brought opportunities for mid- to long-term value revaluation of Chinese technology stocks.
• Stock market outlook: UBS reported that DeepSeek catalyzed the revaluation of Chinese assets, and technology stocks continued to be the main line of the market.
• Recommended stocks and reasons: We recommend Kaiying Network because it is a representative of the emerging digital economy and has demonstrated strong market adaptability. With the advancement of AI technology, the company has continued to innovate in digital content and social media businesses, attracting the attention of many investors.

China Galaxy Securities

• Stock market prospects: Research data from China Galaxy Securities shows that after the Spring Festival in the past ten years, the A-share market has shown a certain upward trend, and the probability of enjoying positive returns is high. Against the backdrop of the gradual recovery of liquidity, the entry of incremental funds, and the coordinated efforts of macro policies, the A-share market is expected to gradually develop upward amid fluctuations.
• Recommended stocks and reasons: We recommend Lens Technology because of its outstanding performance in the glass and transparent display industries, which faces broad market prospects, especially supported by strong demand in the mobile phone and smart device markets, Lens Technology is expected to achieve higher returns on investment.

Deepseek

• Stock market prospects: Deepseek recommends three stocks with the greatest potential based on the policy orientation, institutional views and industry potential of the Chinese stock market in 2025, combined with the current market environment and fundamental data, covering core tracks such as mergers and acquisitions, technology growth, consumer recovery, and undervalued dividends.
• Recommended stocks and reasons:
  • China Southern Power Grid Energy (003035): A listed platform with a relatively low market value under China Southern Power Grid, benefiting from the policy support for the restructuring of central enterprises. Net profit in the first three quarters of 2024 exceeded 100 million yuan, and the price-to-book ratio was less than 3 times, with both safety margin and growth potential.
  • GigaDevice (603986): A leading domestic storage chip company, institutions unanimously predict that the net profit growth rate will exceed 20% from 2024 to 2026. Benefiting from the growth in demand for AI computing power and the trend of domestic substitution, it is a core target in the TMT sector.
  • PROYA (603605): A leader in high-end beauty care, performance continues to exceed expectations, and many institutions have raised their profit forecasts for 2024. The dividend ratio has exceeded 40% for three consecutive years, and the ROE is significantly higher than the industry level.

Kaishi Fund

• Stock Market Outlook: Kaishi Fund believes that the market’s expectations for future economic recovery and corporate profits will gradually increase, and the A-share market is expected to usher in a new round of gains.
• Recommended stocks and reasons: Recommended attention to CATL, because as the global leader in lithium batteries, its market share and profitability are optimistic about the brokerage. In addition, the company’s LRS model and slowing fixed asset investment are expected to further boost cash flow quality. In 2025, power batteries will have strong growth potential, and new technologies and overseas markets will bring growth flexibility and space.

Stock market prospects

Market trends

• Optimistic expectations: Deutsche Bank emphasized that 2025 will be the year when Chinese companies rise globally, and the phenomenon of discounted Chinese stock valuations will disappear. The bull market cycle of A-shares and Hong Kong stocks has started in 2024 and is expected to continue and exceed previous highs. Meng Lei, China equity strategy analyst at UBS Securities, predicts that as more policies are introduced and market sentiment reverses, A-shares will usher in a new round of net inflows from individual investors, and remains optimistic about the performance of A-shares in 2025.
• Caution: Morgan Stanley Chief Investment Officer Mike Wilson believes that attention should be paid to the market volatility risks that the A-share market may face in February and March. As there is a risk of a high-level correction in US technology stocks, this may exacerbate volatility in global markets.

Investment Opportunities

• Technology: China’s investment in technological innovation has continued to increase, especially in artificial intelligence, new energy and other fields, and has achieved remarkable results. These innovative achievements are expected to be transformed into new economic growth points and drive the stock market to continue to improve.
• Consumption: With the transformation and upgrading of China’s economy, consumption upgrading has become a new growth driver. The consumer staples sector has defensive attributes and attractive valuations compared to other sectors.
• Real Estate: Opportunities also exist in the real estate sector, and investors can focus on property owners with sustainable rental income.

Risk Factors

• External Risks: US tariffs and Sino-US tensions are seen as the main risks facing China’s economy and asset markets. These two factors not only directly affect China’s exports and manufacturing, but may also trigger a series of chain reactions that affect the stability of the entire economic system.
• Internal Risks: Volatility in the real estate market has also increased investors’ concerns about uncertainty in the Chinese economy.

Policy Impact