Xi’s value push will show up in Chinese stocks

HONG KONG, Dec 29 (Reuters Breakingviews) – Xi Jinping’s efforts to build a strong stock market will take a leap forward in 2026. The Chinese leader is on a mission to boost asset prices to counter deflation in the world’s second-largest economy. His campaign for companies to increase their payouts is lifting shareholder returns and supporting a bull run in equities. Now he’s doubling down on a push to end ruinous competition – a trend known as “involution”. That ought to fatten corporate profits in sectors spanning autos, batteries, cement, hog farming and more in the coming year. If that sustains, China’s $15 trillion equity market will have a sturdier backbone.

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China’s cash-rich companies are answering official calls for them to “enhance their investment value”. Companies are set to spend about 3.6 trillion yuan ($509 billion) on dividends and buybacks in 2025, up 20% and well over the estimated mid-single-digit earnings growth for listed Chinese firms, notes Kinger Lau, a strategist at Goldman Sachs. The improved returns also benefit cash-strapped local governments: state-owned entities account for about half of the market value.

Companies heeding Xi’s latest call to pull back from price wars will also reduce wasteful capital expenditure, and in turn, improve their cash flows to support rising payouts. This shift is underway already: in the first ten months of 2025, China’s fixed asset investment declined 1.7% year-on-year, while manufacturing activity in November contracted for the eighth consecutive month.