Eliza Wong
Executive Summary
– JPMorgan identifies two primary investment themes emerging from China’s 15th Five-Year Plan: anti-involution measures and service consumption upgrades
– Anti-involution policies could trigger 18-24 month cyclical recovery across 12 key sectors including automotive, batteries, and renewables
– Service consumption represents substantial growth opportunity with China’s spending patterns resembling US levels from the 1970s
– A-shares maintain positive medium-term outlook despite potential short-term consolidation
– Specific stock picks include sector leaders like BYD, CATL, and Kweichow Moutai across both investment themes
China’s Next Growth Phase: Unpacking the 15th Five-Year Plan Opportunities
Global investors are turning their attention to Beijing as China prepares to unveil its 15th Five-Year Plan during the October plenary session. JPMorgan’s latest research report, obtained by trading desks on September 18, provides a comprehensive analysis of how this pivotal policy framework will reshape investment opportunities in A-shares. The 15th Five-Year Plan represents more than just another policy document—it signals China’s strategic shift toward quality growth and market efficiency.
For institutional investors monitoring Chinese equities, understanding the implications of the 15th Five-Year Plan could mean the difference between capturing emerging trends and missing structural market shifts. JPMorgan’s analysis suggests we’re approaching a potential inflection point where policy direction, market fundamentals, and investor sentiment may converge to create substantial opportunities.
Anti-Involution: The Structural Transformation Theme
JPMorgan emphasizes that anti-involution measures will constitute a central pillar of the 15th Five-Year Plan, potentially driving an 18-24 month investment cycle across multiple sectors. This theme addresses one of China’s persistent economic challenges: the “local government corporatization” mechanism that has fueled overcapacity and suppressed returns since the market reforms of the late 1970s.
Sector-Wide Impact and Implementation Timeline
The anti-involution approach aims to restore pricing power and investment returns to normal levels through capacity rationalization and industry consolidation. During the 15th Five-Year Plan period (2026-2030), JPMorgan anticipates stricter constraints and fiscal discipline that will trigger mergers and acquisitions, potentially launching what analysts termed the “consolidation decade.”
JPMorgan has identified 12 sectors positioned to benefit from anti-involution policies:
– Automotive: BYD (比亚迪), Geely Auto (吉利汽车)
– Batteries: Contemporary Amperex Technology Co. Limited (CATL, 宁德时代)
– Lithium: Tianqi Lithium (天齐锂业), Ganfeng Lithium (赣锋锂业)
– Solar: LONGi Green Energy Technology (隆基绿能), Trina Solar (天合光能)
– Cement: Anhui Conch Cement (海螺水泥)
– Chemicals: Wanhua Chemical (万华化学)
– Coal: China Shenhua Energy (中国神华)
– Steel: Baoshan Iron & Steel (宝钢股份)
– Dairy: Inner Mongolia Yili Industrial Group (伊利股份)
– Pork: Muyuan Foods (牧原股份)
– Liquor: Kweichow Moutai (贵州茅台), Wuliangye Yibin (五粮液)
– Logistics: SF Holding (顺丰控股)
Market Mechanics and Wealth Effect
The successful implementation of anti-involution policies could generate significant wealth effects for Chinese households. As corporate profitability improves and stock valuations rise, JPMorgan estimates that equity appreciation could substantially increase household wealth, creating a positive feedback loop for consumption and investment.
Service Consumption: The Next Growth Frontier
Parallel to the anti-involution theme, service consumption upgrades represent the second major opportunity emerging from the 15th Five-Year Plan. JPMorgan’s analysis reveals substantial growth potential when comparing China’s current consumption patterns with historical data from developed markets.
The Comparative Gap Analysis
China’s current economic indicators show remarkable parallels to the United States in the early 1970s. With per capita income reaching $5,660 by end-2024 and service consumption accounting for approximately 46% of total spending, China mirrors US patterns from 1973 ($5,662/49%).
Assuming a 5% compound annual growth rate aligned with China’s 2035 long-term objectives, per capita income would reach $7,655 within five years—equivalent to US levels in 1976-1977—with service consumption proportion potentially rising to 51%.
Sector-Specific Opportunities
JPMorgan’s research identifies three service sectors with particularly significant growth potential compared to US benchmarks:
– Healthcare: 9% of consumer spending vs. 17% in US
– Financial services: Minimal penetration vs. 8% in US
– Culture, education and entertainment: 10% vs. 13% in US
The firm has curated a portfolio of 14 non-financial stocks to capture this service consumption growth, all featuring free-float market capitalization exceeding $1 billion and three-month average daily trading volume above $20 million. Selected companies include:
– Healthcare: Aier Eye Hospital Group (爱尔眼科), Tongce Medical (通策医疗)
– Education: Offcn Education Technology (中公教育)
– Entertainment: Enlight Media (光线传媒), 37 Interactive Entertainment (三七互娱)
Policy Support Accelerating
Since early 2025, Chinese authorities have noticeably intensified policy support for service consumption sectors. Initiatives range from January’s Silver Hair Tourism Train Action Plan to August’s loan interest subsidy program for service industry operators, covering tourism, healthcare, elderly care, childcare, household services, and cultural entertainment.
Market Outlook: Navigating Short-Term Volatility
JPMorgan maintains a constructive medium-term view on A-shares while acknowledging potential near-term consolidation. The ongoing shift in household asset allocation toward equities should support the market’s upward trajectory, though valuation considerations suggest some interim volatility.
Valuation Context and Earnings Growth
The CSI 300 Index currently trades at 14.4 times forward 12-month earnings estimates, approximately 1.7 standard deviations above its median since 2016. While this elevated multiple might suggest limited near-term upside, earnings growth potential remains substantial.
First-half 2025 earnings per share growth reached 5.9% year-over-year for the CSI 300. However, JPMorgan’s bottom-up analysis of individual stock consensus estimates suggests full-year 2025 EPS growth could reach 14.1%, indicating significant acceleration in the second half.
2026 Prospects and Policy Implementation
Looking ahead to 2026, effective execution of anti-involution measures combined with appropriate fiscal support could help maintain consensus expectations for both EPS levels and growth rates. This supportive backdrop would provide sustained momentum for A-shares as the 15th Five-Year Plan implementation gains traction.
Strategic Implications for Global Investors
The 15th Five-Year Plan represents more than just another policy cycle—it signals China’s strategic pivot toward sustainable growth models. For international investors, this transition creates both challenges and opportunities that require nuanced understanding of policy implementation and market dynamics.
Portfolio Construction Considerations
Investors should consider balancing exposure across both anti-involution and service consumption themes. The former offers cyclical recovery potential in traditional industries, while the latter provides structural growth opportunities in emerging service sectors. This balanced approach can help capture different aspects of China’s economic transformation while managing sector-specific risks.
Monitoring Implementation Progress
The successful realization of these opportunities depends heavily on effective policy implementation. Investors should closely monitor several key indicators: capacity utilization rates in targeted industries, merger and acquisition activity, service consumption growth data, and household income trends. These metrics will provide early signals about the effectiveness of the 15th Five-Year Plan measures.
Positioning for China’s Next Development Phase
JPMorgan’s analysis of the 15th Five-Year Plan reveals a roadmap for China’s economic evolution that could redefine investment opportunities in A-shares. The dual themes of anti-involution and service consumption upgrades represent complementary approaches to addressing China’s growth challenges while creating sustainable value.
For sophisticated investors, the coming policy cycle offers numerous avenues for participation—from sector leaders positioned to benefit from industry consolidation to emerging champions in service sectors. The key differentiator will be understanding not just which companies operate in promising sectors, but which possess sustainable competitive advantages and execution capabilities.
As China prepares to unveil its detailed 15th Five-Year Plan framework, global investors should review their China exposure with these structural shifts in mind. The transition from quantity-driven to quality-focused growth may create winners and losers across sectors, making selective positioning increasingly important. Those who accurately anticipate how the 15th Five-Year Plan will reshape China’s economic landscape may be best positioned to capture the coming opportunities in A-shares.
Editor: Wang Yi (王祎) PF220
