One Month of Oil Price Shocks: Why Are Chinese Assets More Resilient?

It has been a full month since the outbreak of the conflict in the Middle East, with Brent crude spot prices soaring 50% to $110 per barrel compared to pre-war levels, sharply worsening the dilemma of global growth versus inflation.

However, amidst this largest-ever oil supply disruption, Chinese assets have shown distinct relative resilience—A-shares have fallen by only 4%, significantly outperforming emerging market peers in terms of risk-adjusted Sharpe ratios. Goldman Sachs believes that the deep transformation of the energy structure, ample oil reserve safety nets, and continuous breakthroughs in AI technology are jointly constructing a "shock-resistant defense line" for Chinese assets.

Goldman Sachs maintains its "overweight" rating on A-shares and H-shares. It has lowered the 12-month target prices for MSCI China and CSI 300 by 5% and 4% respectively, with potential 12-month returns as high as 24% and 12%.

Analysts suggest focusing on three main themes: first, China's long-standing energy diversification strategy is effectively buffering external shocks, with policy dividends accelerating; second, China's PPI deflationary cycle is expected to end 6 to 9 months earlier than previously predicted, with an upward revision of nominal GDP providing implicit support for corporate earnings; third, China's Agentic AI, represented by "OpenClaw," is quietly rising and becoming the next core theme for market repricing.

Energy Structure Moat

In this global oil price shock, China's energy structure has become the most important buffer.

On the data front, in 2024, oil and liquefied natural gas accounted for only 28% of China's primary energy consumption, one of the lowest levels among major global economies; meanwhile, alternative and renewable energy sources such as nuclear, wind, solar, and hydro already account for 40% of China's power generation, a massive leap from 26% a decade ago.

Regarding supply security, China's strategic and commercial oil reserves are ample, capable of supporting over 110 days of consumption even if crude oil imports were to drop to zero. Furthermore, China's energy import sources are highly diversified, with non-Middle Eastern oil producers like Russia, Australia, and Malaysia providing reliable alternative supply channels.

Based on these structural advantages, Goldman Sachs believes that the macroeconomic cost China is bearing in this shock is the lightest among major economies.

PPI Turns Positive 6 to 9 Months Earlier

An easily overlooked but thought-provoking signal is emerging: the surge in global energy prices is expected to lead China out of its deflationary cycle sooner.

Latest forecasts from Goldman Sachs economists show that China's PPI is expected to end its 41-month run of year-on-year negative growth as early as March 2026, a full 6 to 9 months earlier than previously predicted. Due to the outbreak of the conflict in the Middle East, Goldman Sachs' forecast for China's nominal GDP growth has also been revised upward by 0.8 percentage points.

Historical data shows that while investors are often skeptical of cost-push inflation, rising PPI has historically been highly positively correlated with improved corporate earnings and positive stock market returns—even during cost-driven inflationary periods like 2011, 2017/18, and 2021. The decline in real interest rates should theoretically also support corporate capital expenditure intentions and drive a reallocation of household assets from cash/savings into the stock market.

A-share "Slow Bull" Logic Unchanged

Since the outbreak of the war, although A-shares and H-shares have pulled back along with global markets, their value for diversified allocation has been fully demonstrated. The CSI 300 and MSCI China have fallen 4% and 7% respectively since February 28 (-3% and -8% year-to-date), remaining broadly in line with the MSCI World Index and slightly outperforming emerging markets outside China.

More importantly, over the past month, A-shares and H-shares have significantly outperformed peers on a risk-adjusted basis: the A-share Sharpe ratio was -0.7, and the H-share ratio was -0.6; the 52-week rolling correlation coefficients with the S&P 500 were only 0.2 and 0.3, respectively, highlighting their unique diversification value as "low-correlation" assets.

With foreign ownership in the A-share market currently at only 3%, combined with the policy backing of the government's "national team" recently returning to net buying, and stock valuations that remain undervalued relative to domestic interest rates, the "slow bull" logic for A-shares still holds, continuing to provide strong alpha opportunities for cross-strategy investors.

"OpenClaw" Emerges: Oil Prices Steal the Limelight from Chinese AI, but the Story Isn't Over

The conflict in the Middle East has objectively overshadowed another major milestone in China's AI sector—the rise of Agentic AI.

If the "DeepSeek moment" proved that China can produce globally competitive AI models despite export controls, the explosive growth of "OpenClaw" (with GitHub stars reaching approximately 336,000) and the sharp rise in Token usage in recent months provide strong evidence of the wide application and powerful commercial potential of Chinese AI.

From a strategic standpoint, this shift from AI chatbots to Agentic AI demonstrates the key conditions for Chinese AI to remain competitive in the global ecosystem: a massive user base, powerful open-source large language models (LLMs), highly competitive Token costs, complete AI infrastructure, and world-leading manufacturing capabilities for physical AI applications.

Potential beneficiaries of "OpenClaw" identified by Goldman Sachs have fallen 8% collectively this year, but since the start of 2025, they have outperformed the MSCI China Index and the Goldman Sachs Broad China AI Basket by 44 and 14 percentage points, respectively. This alpha is enough to show that the AI theme has not faltered amidst geopolitical turmoil.