Morgan Stanley says China’s new wave of reforms is opening up fresh opportunities for investors. The bank believes Beijing’s push to cut back on cutthroat competition and focus on sustainable growth will improve corporate returns over time.
In a note on Tuesday, analysts highlighted China’s “anti-involution” strategy. The goal is to reduce problems like deflation, excess capacity, and overly intense market rivalry. According to Morgan Stanley, this shift should help MSCI China’s return on equity rise to 13.3 per cent by 2030.
The bank used a “3P” framework, priority, progress, and potential, to pick out the sectors and companies best positioned to gain from the reforms. At the top of the list are electric vehicle batteries, followed by steel, cement, and airlines. Sectors like solar equipment and chemicals also show promise but face structural challenges. Meanwhile, industries such as autos, auto parts, and express delivery remain weighed down by fragmentation and limited policy support.
In total, Morgan Stanley identified 22 companies across nine industries, all rated Overweight. Auto names included Geely, Li Auto, XPeng, Changan Auto, Desay SV, Bethel Automotive, and Foryou. On the tech and consumer side, the list featured Alibaba, Meituan, Haidilao, Chagee Holdings, and Yum China. Materials and energy picks included Baoshan Iron & Steel, Shenhua Energy, Anhui Conch Cement, Sinopec, and PetroChina. Other highlighted companies were CATL, Beijing New Building Materials, PICC P&C, Flat Glass Group, and Air China.
The analysts stressed that the reforms mark a deeper shift in China’s strategy. Instead of relying on short-term stimulus, the country is moving toward long-term structural change, balancing growth with innovation and sustainability.
While short-term volatility is expected, Morgan Stanley said the overall picture remains constructive. Gradual reflation, combined with steady policy execution, should support earnings growth in the years ahead.
