China Stocks Look Higher as Policy Support and AI Optimism Build

Key Points

• Mainland China’s CSI 300 and SSE Composite target new 2026 highs as Beijing pivots from credit controls toward stimulus.
• Beijing’s renewed policy support revives bullish sentiment despite earlier concerns over fading fiscal and monetary easing.
• Improving US-China dialogue eases trade risks, supporting demand for Mainland and Hong Kong-listed equities.

Market Overview

On February 10, 2026, the CSI 300 and SSE Composite Index in Mainland China are poised to reach new highs as the Chinese government shifts its focus from credit controls to stimulus measures. The Chinese economy has shown resilience against US tariffs, leading to a bullish sentiment in the stock market.

Recent data has tempered expectations for further monetary and fiscal support, but new announcements from Beijing have lifted market sentiment, with both indices looking at potential three-month winning streaks.

Beijing's Focus on the Auto Sector

The Ministry of Commerce in China is actively working to boost domestic demand, particularly in the automotive sector. This includes optimizing trade-in schemes and introducing new policies to stimulate auto sales, which are crucial for domestic consumption.

Brian Tycangco from Stansberry Research highlighted the rapid growth of New Energy Vehicle (NEV) sales in China, which surged from 1.3 million units in 2020 to 16.5 million in 2025. However, he cautioned that this growth may not be sustainable without adjustments following the expiration of subsidies.

US-China Relations

Improving relations between the US and China are critical for market sentiment. Recent visits by US Treasury officials to China aim to strengthen communication and advance trade discussions. This shift in US policy could enhance demand for Chinese goods and support the bullish outlook for Chinese stocks.

Additionally, major US tech companies are considering switching to Chinese memory chips, which could further improve relations and access to China's supply chain.

Risks to the Bullish Outlook

Despite the positive sentiment, several risks could undermine the bullish outlook, including:

• Escalation of US-China trade tensions.
• Global tariffs affecting demand for Chinese products.
• Delays in Beijing's monetary and fiscal policy measures.
• Sharp declines in external demand for Chinese goods.
• Weakening domestic demand and a deteriorating housing market.

Technical Outlook for CSI 300

The CSI 300 is currently trading above its 50-day and 200-day EMAs, indicating a bullish trend. A breakout above the 4,750 resistance level could lead to further gains, targeting the January high of 4,837 and potentially reaching 5,000.

Conclusion

The short- and medium-term outlook for Mainland China and Hong Kong-listed stocks remains positive, driven by policy support, advancements in AI, and strong external demand. However, the market will need to navigate potential risks related to trade relations and domestic economic conditions.