Chinese Assets Have Safety Premium! Institutions Speak Out Intensively, Safety Becomes a Global Scarce Commodity

March 23, A-shares experienced significant volatility, with the Shanghai Composite Index briefly falling below 3,800 points during trading. Market sentiment clearly weakened. However, many institutions remain very optimistic about the long-term prospects of A-shares.

Most institutions believe that, against the backdrop of increasingly turbulent global political and economic conditions, China has advantages in energy security and supply chain resilience. When overseas economies face shutdowns due to rising energy costs and raw material shortages, Chinese manufacturing, with its complete industrial chain and stable delivery capabilities, is expected to take on global orders and reallocate them. China’s relatively stable energy security and industrial system may also become a “safe haven” for global capital.

China Has Advantages in Energy Security and Supply Chain Resilience

Since the US-Iran conflict, international oil prices have surged significantly, causing global capital to become highly cautious. Markets are extremely worried about the impact of energy price fluctuations on the economy.

In response, Caitong Securities states that China’s primary energy self-sufficiency rate is approximately 83.2%, significantly higher than major manufacturing economies. China has formed a combined model of “coal as a foundation, oil and gas as supplements, and non-fossil energy as uplift.” Non-oil and gas energy accounts for over 70%, with domestic coal resources combined with nuclear, wind, solar, and hydropower, forming a solid base for industrial production. China’s crude oil sourcing is diversified, and it has deep technological reserves in coal chemical industry, giving it a stronger ability to secure industrial raw materials and hedge against extreme environmental conditions compared to competitors.

Caitong Securities notes that when overseas economies face shutdowns due to rising energy costs and raw material shortages, Chinese manufacturing, with its complete industrial chain and stable delivery, is poised to take on global order reallocation.

“Disruptions in the global supply chain once again provide an opportunity to test China’s manufacturing pricing power,” CITIC Securities pointed out in a recent research report. They emphasize that China’s core asset pursuit is to enhance its manufacturing pricing power, and the key to transactions is resource and manufacturing enterprises with existing market share and competitive advantages actively managing future capital expenditure, transforming existing advantages into increased pricing power and profit margin recovery.

From an industry trend perspective, the expansion of code and physical scarcity in China reflects the enhancement of manufacturing pricing power. Disruptive innovations like AI and disturbances in the global energy supply chain are strengthening this trend.

“The rapid rise in oil prices provides an opportunity to test China’s manufacturing pricing power. The recent energy cost shocks caused by Middle East conflicts give us a window to observe and verify whether China’s manufacturing advantages can structurally demonstrate pricing power,” said CITIC Securities.

Zhejiang Securities’ chief strategy analyst Liao Jingchi also stated, “China’s energy structure gives it stronger supply resilience. Building a ‘safety cushion’ for industrial costs makes China more advantageous compared to traditional manufacturing powers like Japan, South Korea, and Germany, which rely heavily on oil and gas imports. China’s relatively stable energy security and industrial system may become a ‘safe haven’ for global capital.”

Buying China Is Buying Safety

“With the collapse of dollar dominance centered on oil dollars, the RMB governance based on China’s industrial strength may lead to a significant overvaluation of Chinese assets,” said Liu Yuhui, Vice Director of the Shanghai Center for Financial Development and Chief Economist.

He added, “Safety has become the most scarce resource in today’s world. Buying China is buying safety. This is a clear consensus emerging amid global turbulence, and it is also the answer provided by China’s supply chain and large-scale market infrastructure. The world is accelerating towards this consensus: in the future, safety can only be bought through China’s supply chain.”

Guotai Haitong’s chief strategy analyst Fang Yi also stated that stability is the foundation of China’s stock market, which has a lower risk premium. The impact of micro trading shocks is expected to be short-term, and the current position is not suitable for blindly selling off. China’s stock market is likely to see an important bottom and rebound zone.

“Due to ongoing US-Iran tensions and energy blockade concerns, some investors’ confidence has weakened. China’s market indeed cannot be separated from energy price shocks, but it will not be dragged down by a single risk narrative. China’s relatively stable geopolitical landscape, higher energy self-sufficiency, advancing or even leading technological progress, and a complete industrial system are all rare globally,” Fang Yi said.

Layout: Wang Yunpeng

Proofreading: Yang Lilin