Analysis Report on the Impact of China's GDP Growth Slowdown on A-Share Market Valuation and Sector Rotation

Based on all the data and information I have collected, I now provide you with a systematic and comprehensive analysis report:

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China’s GDP grew by 5.0% in 2024. Although it reached the official target, the quarterly growth rate showed obvious fluctuations, rebounding from the low points of 4.7% and 4.6% in Q2 and Q3 to 5.4% in Q4[1]. Against this macro backdrop, the A-share market staged a decoupled rally, with the Shanghai Composite Index rising 18.30% for the year and the ChiNext Index surging as much as 51.42%[2]. This report deeply analyzes the mechanism of how China’s GDP growth slowdown affects A-share valuation and sector rotation, and looks ahead to expectations of policy easing in 2026.

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According to the latest data from the National Bureau of Statistics, after final verification, the current-price total GDP of China in 2024 was 134.8 trillion yuan, a year-on-year increase of 5.0% at constant prices, exactly meeting the target set by the authorities[1].

Industry Category	2024 Growth Rate	Industry Structure Share	Development Trend
Primary Industry	+3.7%	6.8%	Stable Operation
Secondary Industry	+5.0%	36.4%	Steady Operation
Tertiary Industry	+5.1%	56.8%	Continuous Optimization

• Q1 2024
  : 5.3%, a good start, continuing the recovery momentum of 2023
• Q2 2024
  : 4.7%, growth slowed down, facing pressure from domestic and external demand
• Q3 2024
  : 4.6%, under pressure, policy observation period
• Q4 2024
  : 5.4%, stabilized and rebounded, exceeding market expectations

• Information Transmission/Software IT: +11.7%, AI and digital economy become core driving forces
• Leasing and Business Services: +11.1%, strong demand for professional services
• Accommodation and Catering: +7.0%, recovery of consumption scenarios
• Transportation: +6.7%, stable logistics supply chain

• Real Estate: -2.2%, in deep adjustment
• Construction: +2.9%, dragged down by the real estate chain
• Finance: +3.7%, under pressure from net interest margin narrowing

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As of the end of December 2025, the valuation levels of major A-share indices are as follows[2][3]:

Index	Price-to-Earnings (PE)	Annual Growth Rate	Historical PE Percentile
Shanghai Composite Index	16.57x	+18.30%	96.67%
Shenzhen Component Index	31.66x	+30.62%	N/A
ChiNext Index	41.27x	+51.42%	43.53%
STAR 50 Index	210.84x	+37.51%	45.83%
CSI 300 Index	14.19x	+22.28%	N/A
Wind All-A Index	22.28x	—	N/A

The PE of the Shanghai Composite Index reached 16.57x, which is in the historical high percentile range (96.67%), reflecting the market’s positive pricing of economic recovery and policy benefits[3].

Although the PE of the ChiNext Index (41.27x) is high, its historical percentile is only 43.53%; the absolute valuation of the STAR 50 Index is high but its percentile is moderate, indicating that technology stocks have long been in a high valuation state[3].

The valuation of the CSI 300 Index (14.19x) is relatively reasonable, with medium- to long-term allocation value.

• The equity-bond valuation spread of the Shanghai Composite Index exceeds 4%, and the earnings yield is significantly higher than the government bond yield
• The equity-bond valuation spread of the Hang Seng Index reaches 4.31% (compared with U.S. bonds), enhancing its relative attractiveness[3]

From a global perspective, the Chinese stock market still has a valuation discount of about 35% compared to developed markets[2]. The equity-bond valuation spread of the S&P 500 is negative (-0.76%), indicating that its valuation has fully covered or even discounted the risk-free return[3].

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• Hard technology sectors such as AI computing power, robotics, and semiconductors led the gains
• The technology sector showed a rotation characteristic of “switching between high and low valuations”
• The number of stocks that doubled in price during the year hit a 10-year high, reaching 533, an increase of over 460% compared to 2024[2]

• The non-ferrous metals industry index rose by 90.16%, and the energy metals index surged by 100.39%
• Benefiting from global inflation expectations and supply-demand gaps

• The total market capitalization of the electronics industry in the A-share market reached 13.93 trillion yuan, historically surpassing banking and ranking first in A-share industry market capitalization for the first time[2]

Rank	Industry	Annual Growth Rate	Characteristics
1	Non-ferrous Metals	+92.64%	Led the gains
2	Communications	+87.27%	AI computing power
3	Electronics	+49.40%	Semiconductors
4	Robotics	+68%	Emerging industry
5	Real Estate	-12%	Continuous adjustment

Electronics, computer, non-ferrous metals, and power equipment ranked top in net purchases
CSI 300, CSI 500, STAR 50, and ChiNext continued to see net inflows
Technology growth, financial real estate, and consumer leaders are favored

As of the end of December 2025, the balance of margin trading and short selling reached 2.5517 trillion yuan, a record high; the total scale of domestic ETFs exceeded 6 trillion yuan[2]

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• Implemented a moderately loose monetary policy stance
• New RMB loans reached 16.27 trillion yuan for the whole year
• The increment of social financing scale was 35.6 trillion yuan, an increase of 3.34 trillion yuan year-on-year[4]

• Lowered the interest rates of structural monetary policy tools
• Expanded the quota of reloans for scientific and technological innovation to 1.2 trillion yuan
• Unified the down payment ratio for commercial housing loans to 30%[4]

• The average RRR of financial institutions is 6.3%, with room for reduction
• It is expected that the RRR will be cut 1-2 times to release long-term liquidity

• There is room for a 20-30 basis point cut in the current policy interest rate
• The weighted average interest rate on corporate loans has dropped to around 3.1%

• The annual operation volume of the carbon emission reduction support tool can reach 800 billion yuan
• Reloans for service consumption and elderly care will be included in the health industry[4]

• Promote stable economic growth
• Promote a reasonable rebound in prices

• From “extraordinary” to “flexible and efficient”
• Regulation rhythm: Combining counter-cyclical adjustment and cross-cyclical adjustment[5]

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• Economic downward pressure → Loose monetary policy → Interest rate decline → Stock valuation increase
• The social financing scale increased by over 35 trillion yuan in 2025, and abundant liquidity supported valuation repair[4]

• Intensified steady growth policies → Improved market risk appetite → Valuation expansion
• After the September Political Bureau Meeting, a combination of policies was introduced, and the market rose in response

• Slowdown of traditional economy → Capital concentrates in high-growth industries → Valuation increase of technology growth sectors
• Valuations of new kinetic energy industries such as AI and digital economy expanded against the trend

Driving Factor	Beneficiary Industries	Disadvantaged Industries
Consumption Recovery	Accommodation & Catering, Cultural Tourism, Automobiles	—
Industrial Upgrade	AI, Semiconductors, New Energy	Traditional Manufacturing
Real Estate Adjustment	—	Real Estate, Construction, Banking
Global Inflation	Non-ferrous Metals, Chemicals	Cost-sensitive Industries

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• Focus on sectors with better-than-expected annual report forecasts
• Allocate high-dividend blue chips as a defensive bottom position
• Grasp the early start of the “Spring Rally”
• Appropriately participate in pre-holiday consumption sectors such as consumer electronics and cultural tourism

• Continue to lay out the main line of technology growth (AI applications, semiconductor equipment)
• Focus on cyclical stock opportunities (copper, chemicals) brought by PPI rebound expectations
• Accumulate defensive consumer and pharmaceutical sectors on dips
• Focus on valuation repair of leading Hong Kong-listed internet companies

• Re-rating of core assets remains the medium- to long-term main line
• Grasp structural opportunities brought by China’s manufacturing upgrade
• Attach importance to the long-term allocation value of high-dividend assets
• Focus on emerging industries such as new energy and intelligent manufacturing

Theme Direction	Sub-sectors	Logical Support
AI Industry Chain	Computing Power Chips, Application Scenarios, Robotics	Definite industrial trend
Cyclical Reversal	Copper, Aluminum, Chemicals, Steel	Expectation of PPI rebound
Consumption Recovery	Cultural Tourism, Automobiles, Home Appliances	Domestic demand policy support
High-dividend Strategy	Banking, Insurance, Energy, Transportation	Beneficiary of interest rate decline

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• Global economic recession risk and trade friction uncertainty
• Trump’s Tariff 2.0 may drag down GDP by 0.3-0.4%[3]

• Continued adjustment of the real estate market has a cascading drag on the industrial chain
• Credit risk exposure in the financial system

• Low operation of CPI/PPI brings pressure on corporate profits
• Slow recovery of residents’ consumption willingness

• Some popular sectors have accumulated large gains, facing adjustment pressure
• The historical PE percentile of the main board is at a high level

• If the intensity of policy easing is weaker than market expectations
• Policy transmission lag may be longer than expected

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1. GDP growth slowdown and A-share rally are not contradictory
   : Liquidity easing, policy expectations, and structural opportunities hedge against economic downward pressure.

2. Valuation differentiation is the norm
   : The Shanghai Composite Index is in the historical high percentile, but the valuation of growth sectors is relatively reasonable, and there is still a discount from a global perspective.

3. Sector rotation revolves around industrial upgrade
   : Industries benefiting from policies and industrial trends such as AI, semiconductors, and non-ferrous metals continued to lead the gains.

4. Policy easing will continue
   : There is still room for RRR and interest rate cuts in 2026, and structural policy tools will continue to exert force.

: Transition from valuation-driven to earnings-supported, expected to move towards a “low-volatility slow bull market”[2]

: Goldman Sachs forecasts that the earnings of Chinese stocks will grow by 14% in 2026, with about 10% valuation repair potential[3]

: Inflows of incremental micro funds are expected to continue to increase, and residents’ funds will gradually shift to the equity market through absolute return products

: China’s stock market will continue to rise by about 38% by the end of 2027[3]

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[1] National Bureau of Statistics - Announcement on the Final Verification of Gross Domestic Product in 2024 (https://www.stats.gov.cn/sj/zxfb/202512/t20251226_1962144.html)

[2] Mr. Ren’s Blog - A-Shares This Year: Structural Changes and Value Re-rating (https://www.renleiblog.com/post/4423.html)

[3] Sina Finance - 2025 Summary and 2026 Outlook of Major Global Asset Classes (https://finance.sina.com.cn/stock/roll/2025-12-28/doc-inhemiux0458303.shtml)

[4] Xinhua Finance - Social Financing Scale Exceeded 35 Trillion Yuan in 2025, Moderately Loose Monetary Policy Effectively Supports the Economy (https://m.cnfin.com/yw-lb//zixun/20260116/4366977_1.html)

[5] Study Times - Taking Promoting Stable Economic Growth and Reasonable Price Rebound as Important Considerations for Monetary Policy (http://theory.people.com.cn/n1/2026/0116/c40531-40646461.html)

[6] Hua Chuang Securities - 2026 Will Be the First Year of Awakening Allocation Value of Chinese Stocks (https://wallstreetcn.com/articles/3761990)

[7] East Money - Ten Institutions on the Market: How to Interpret After the Largest Trading Volume in A-Share History (https://wap.eastmoney.com/a/202601183622659962.html)

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This report is generated by Jinling AI Financial Analysis, data cutoff date: January 19, 2026