Overview
Analyst Survey 2025 (full report)
Doubts about investing in China re-emerged last year as the country grappled with a series of economic difficulties. But our annual Analyst Survey shows that the government’s stimulus measures are expected to mitigate downward economic pressure and improve the earnings outlook for a number of sectors.
Chart 1: China analysts have high hopes for both fiscal policy...
What are your expectations for how fiscal policy will impact your companies?
Chart shows percentage of analysts responding to the question. Analysts who responded “No impact” are not shown on the chart. Source: Fidelity International, January 2025.
Chart 2: ...and monetary policy
What are your expectations for how monetary policy will impact your companies?
Chart shows percentage of analysts responding to the question. Analysts who responded “No impact” are not shown on the chart. Source: Fidelity International, January 2025.
Fidelity’s China analysts have high expectations for fiscal and monetary policies in 2025: over 70 per cent of them say monetary policy will have a positive impact on companies’ fundamentals, while more than 80 per cent say the same about fiscal plans. Both ratios are the highest in the world.
“The economy is slowing down,” says Eric Tse, an equity analyst covering Chinese auto companies. “But the slowdown should be offset by stimulus policy to boost domestic consumption and reduce oversupply.”
Pivot for growth
After months of piecemeal measures failed to revive the economy, China unveiled a broad package of stimulus late last year - including interest rate cuts, support for the property market, and offering citizens the option to trade in their old products for subsidised newer models in an effort to boost consumption. Leaders also pledged to expand fiscal spending and loosen monetary policy at December’s Central Economic Work Conference, which sketches out economic targets for the year ahead.
Generating demand has become a high priority for China. At the start of 2025, the government expanded the consumer trade-in programme and increased funding for industrial equipment upgrades. Eric Zhu, an equity analyst covering consumer discretionary, says the stimulus will lead to a gradual recovery in that segment of the economy, which has so far struggled to bounce back.
“It will encourage middle-class Chinese, who have excess savings and a demand for reasonable replacements and upgrades, to spend more on big discretionary items like appliances, furniture, and consumer electronics,’’ he says. “Additionally, China is relaxing visa requirements for foreigners, which will boost inbound tourism, helping the hotel, travel, and other related consumer sectors.”
Earnings outlook
But there are uncertainties about whether stimulus measures like these will be sufficient to completely offset a combination of structural economic challenges and potential US tariffs. Domestic demand has struggled to pick up as the persistent real estate slump and the weak job market weigh on consumer and business confidence, which raises deflationary pressure even as the central bank has eased monetary policy.
On top of the domestic hurdles, pressure will come from abroad. US President Donald Trump, who took office earlier this month, has threatened to put tariffs of as much as 60 per cent on Chinese goods. According to our survey, 11 per cent of analysts say geopolitical risks will have a significantly negative impact on Chinese companies’ fundamentals, the highest across the world. Two thirds see a moderately negative impact, the highest in Asia.
Chart 3: China analysts expect more downside from geopolitics
What impact do you expect geopolitical risk will have on your companies’ profitability over the next 12 months?
Chart shows percentage of analysts responding to the question “What impact do you expect geopolitical risk will have on your companies’ profitability over the next 12 months?” No analyst selected “significantly positive impact.” Source: Fidelity International, January 2025.
As the winner in the tug of war between policy stimulus and macro challenges isn’t yet clear, less than half (44 percent) of analysts in China expect their companies’ margins to moderately increase over the next 12 months, compared with 67 per cent in Japan and 56 per cent elsewhere in Asia. Of the China respondents, 44 per cent estimate margins will stay the same and 11 per cent estimate a moderate deterioration.1
“Management teams of domestic-facing companies will need business momentum to pick up before they are more confident to invest,” says Teddy Gao, an equity analyst covering small-cap companies. “That being said, export-facing companies will step up on capex to relocate capacity out of China."
More than half (56 per cent) of analysts say the confidence levels of management teams is the same as last year. Only 28 per cent are more positive.
Notable exceptions
Nevertheless, there are plenty of stories Fidelity’s analysts have unearthed across sectors in China that give them reasons for optimism.
Duanting Zhai, a healthcare equity analyst, sees incremental improvements in Chinese medical equipment companies’ fundamentals in 2025 as they benefit from the government’s trade-in programme.
Most importantly, she says, domestic players tend to be quick in upgrading their technology and narrowing the gap with global peers, which will help them gain market share over the long term.
Dividends and buybacks are moving up the corporate agenda. Alex Dong, an equity analyst covering consumer staples companies, says stocks with sustainable earnings streams and growing dividend payments will be more resilient amid the gradual recovery of consumer demand.
Around 60 per cent of Chinese analysts expect the companies they cover will moderately increase total dividend payouts this year. That’s higher than the 38 per cent in Asia (ex China, ex Japan), although it still lags behind Japan, which stands at almost 90 per cent - the highest in the world.
In the face of US trade sanctions, China has stepped up support for the local semiconductor industry, seeking to become self-sufficient in chip production. Home-grown semiconductor tool makers are starting to make headway in developing more sophisticated machines to produce advanced chips.
“Chinese equipment suppliers are still playing catch-up with the US and Japanese leaders,’’ says Allen Yang, an equity analyst covering semiconductors. “But Chinese chip makers are actively replacing western suppliers with domestic options due to geopolitics. I see large potential for revenue growth for domestic equipment makers.”
Another intriguing story is Chinese companies’ overseas expansion. China’s leading battery makers and auto part suppliers have built manufacturing facilities abroad to better capture the opportunities presented by the era of electrification and digitisation, says auto analyst Tse.
“Chinese companies’ heavy investment in R&D and access to the world’s largest electric vehicle market will help them maintain technology leadership and enhance their competitive edge over international peers,’’ he says. “Chinese suppliers with dominant market shares will be able to pass cost increases from rising protectionist measures on to customers.”
Although there is some way to go before China can welcome a full-scale economic recovery, it’s the businesses that have built resilience that are likely to thrive as further stimulus is delivered – perhaps emerging even more vibrant than before.
