One month after the oil price shock, the relative resilience of Chinese assets can be traced to several factors: a low level of external dependence in the energy consumption structure, ample strategic reserves as a safety buffer, continuous independent breakthroughs in AI technology, and the naturally low correlation between A-shares and global markets, all of which contribute to this shock-resistant foundation. While the risk of global stagflation has not been fully mitigated, Goldman Sachs’ assessment is clear: at current price levels, the risk-reward ratio remains favorable, and both A-shares and H-shares are worthy of strategic allocation.
One month has passed since the outbreak of the Middle East conflict, and the spot price of Brent crude oil has surged by 50% to $110 per barrel compared to pre-war levels, sharply worsening the global dilemma between growth and inflation.
However, amid the largest oil supply disruption in history, Chinese assets have demonstrated notable relative resilience — with A-share declines limited to just 4%, significantly outperforming emerging market peers on a risk-adjusted Sharpe ratio basis. Goldman Sachs believes that deep transformation in the energy structure, ample oil reserve safety buffers, and continuous breakthroughs in AI technology are collectively building an "anti-shock defense line" for Chinese assets.
Goldman Sachs maintains its "overweight" rating for A-shares and H-shares. It has lowered the 12-month target prices for MSCI China and CSI 300 by 5% and 4%, respectively, corresponding to potential 12-month returns as high as 24% and 12%.
Analysts recommend focusing on three key themes: First, China's multi-year strategy of energy diversification is effectively cushioning external shocks, with policy dividends accelerating. Second, China's PPI deflation cycle is expected to end 6 to 9 months earlier than previously forecast, providing implicit support to corporate profits through upward revisions to nominal GDP. Third, China's Agentic AI, represented by "OpenClaw," is quietly emerging as the next core theme to be revalued by the market.
Energy Structure Moat
Amid this global oil price shock, China's energy structure has become the most critical buffer.
In terms of data, petroleum and liquefied natural gas accounted for only 28% of China's primary energy consumption in 2024, one of the lowest levels among major global economies. Meanwhile, alternative and renewable energy sources such as nuclear, wind, solar, and hydropower already account for 40% of China's power generation, up significantly from 26% a decade ago.
In terms of supply security, China's strategic and commercial oil reserves are sufficient to support over 110 days of consumer demand even if crude oil imports were completely halted. Additionally, China's energy import sources are highly diversified, with reliable alternative supply channels provided by oil-producing countries outside the Middle East, such as Russia, Australia, and Malaysia.
Based on these structural advantages, Goldman Sachs believes that the macroeconomic cost borne by China in this round of shocks is the lightest among major economies.
PPI to Turn Positive 6 to 9 Months Earlier
An easily overlooked but thought-provoking signal is emerging: the global surge in energy prices is expected to help China exit its deflationary cycle earlier than anticipated.
The latest forecast from Goldman Sachs economists indicates that China's PPI could end a 41-month streak of year-on-year negative growth as early as March 2026, which is 6 to 9 months earlier than previously predicted. Influenced by the outbreak of conflict in the Middle East, Goldman Sachs has also raised its forecast for China's nominal GDP growth by 0.8 percentage points.
Historical data shows that although investors are typically skeptical about cost-push inflation, upward movements in PPI have historically been highly correlated with improved corporate profitability and positive stock market returns—even during inflationary periods driven primarily by costs, such as in 2011, 2017/18, and 2021. Theoretically, a decline in real interest rates should also support corporate capital expenditure intentions and drive a reallocation of household assets from cash/savings to the equity market.
The logic of a 'slow bull' in the A-share market remains intact.
Since the outbreak of the war, while the A-share and H-share markets have retreated alongside global equities, their value as diversified investment allocations has been fully demonstrated. The CSI 300 and MSCI China indices have fallen by 4% and 7%, respectively, since February 28 (year-to-date declines of -3% and -8%), roughly in line with the MSCI Global Index and slightly outperforming emerging markets outside of China.
More importantly, over the past month, the risk-adjusted performance of A-shares and H-shares has significantly outperformed similar asset classes: the Sharpe ratio for A-shares was -0.7, and for H-shares, -0.6; the rolling 52-week correlation coefficients with the S&P 500 were only 0.2 and 0.3, respectively, highlighting their unique diversification value characterized by 'low correlation.'
Currently, foreign ownership accounts for only 3% of the A-share market. Coupled with policy support from government 'national teams' recently turning net buyers again, and stock valuations still being undervalued relative to domestic interest rates, the 'slow bull' logic in the A-share market remains valid, continuing to offer robust opportunities for excess returns to cross-strategy investors.
"OpenClaw" emerges: Oil prices have overshadowed China’s AI advancements, but the story is far from over.
The Middle Eastern conflict has objectively overshadowed another significant milestone in China's AI sector—the rise of Agentic AI.
If the 'DeepSeek moment' demonstrated China's ability to produce globally competitive AI models despite technology export controls, then the explosive growth of 'OpenClaw' (with approximately 336,000 GitHub stars) and the sharp increase in token usage over recent months provide strong evidence of the widespread application and powerful commercial potential of China’s AI technologies.
From a strategic perspective, this transition from AI chatbots to agent AI demonstrates the key conditions necessary for China’s AI to maintain its competitiveness within the global ecosystem: a vast user base, open-source and highly capable large language models (LLMs), highly competitive token costs, robust AI infrastructure, and world-leading manufacturing capabilities in physical AI application scenarios.
The potential beneficiaries of "OpenClaw" identified by Goldman Sachs, despite an 8% cumulative decline year-to-date, have outperformed the MSCI China Index and Goldman Sachs’ Broad China AI Portfolio by 44 percentage points and 14 percentage points respectively since 2025 — this excess return is sufficient to indicate that the AI investment theme has not lost relevance amid geopolitical turbulence.
Editor/Melody