Five global scenarios that could shape Chinese markets in 2025 and 2026
As global macroeconomic forces converge with the evolving geopolitical landscape, Chinese markets are poised for turbulence and opportunity in 2025-26.
Analysts at UBS project that a Blue Sweep will reduce U.S.-China trade tensions by promoting a stable policy environment with fewer disruptions.This scenario aligns with the prospect of China outperforming global markets, as businesses benefit from policy clarity and decreased trade barriers.In contrast, a Republican victory—a Red Sweep—could reignite trade tensions.
UBS projects that Chinese equities could suffer a 9-15% de-rating under this scenario, as the market grapples with heightened uncertainties and possible retaliatory measures from China.A broader increase in global tariffs—whether driven by geopolitical fragmentation or new trade disputes—presents a disruptive outlook.
Even though direct effects on listed firms may be limited, UBS emphasizes that secondary impacts—such as deteriorating market sentiment and intensified domestic competition—would weigh heavily on investor confidence.A U.S. recession would have mixed implications for Chinese markets. On one hand, global equities would likely experience a sharp sell-off as investors reduce exposure to risk assets.
While the broader global market may struggle, China’s continued focus on structural reforms and domestic stability offers a path to a mild recovery in 2026.The final scenario envisions global central banks easing monetary policy prematurely, only to reverse course as inflation persists.
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