Li Xunlei: Tech Sector Remains Main Theme of Structural Market, AI Track to Stay Strong but Stocks May Diverge

On September 19, during the 2026 Tsinghua PBCSF Chief Economists Forum, Li Xunlei, Chief Economist at Zhongtai International, shared his views on capital markets. He noted that the main thread of the structural market rally remains in the technology sector. Regarding artificial intelligence (AI), Li argued that to change the "siphoning effect" of the tech sector on market funds, macro policy support must be strengthened.

Fed May Raise Rates More Than Twice This Year

Q: You previously proposed three signals to observe whether the AI bubble has burst, one of which is inflation or Fed rate hikes. The Fed recently officially announced a rate hike. Does this mean the risks associated with AI-related assets need to be reassessed?

Li Xunlei: This is just one factor. Inflation will lead to continued Fed rate hikes—hikes have only just begun. The mainstream view expects two rate hikes within the year, but I estimate there may be more than two. If rate hikes exceed expectations, it could trigger the bursting of the AI bubble.

The other two reasons I mentioned earlier are:

• Cash flow issues for AI companies — if their cash flows encounter problems, the bubble will naturally burst
• Employment issues — if the negative impacts of AI drive up unemployment, it will provoke public opposition and force companies to adjust their capital expenditure strategies

Therefore, we cannot simply assume the AI bubble is about to burst just because a rate hike has occurred; it is not that straightforward.

Optimistic About Allocating to AI or STAR Market-Related ETFs

Q: At the beginning of the year, you judged that A-shares would experience a structural bull market this year, with opportunities concentrated in the technology sector. More than half the year has passed. Looking ahead to the fourth quarter and next year, will the structural bull market continue? Will the main theme shift to other sectors, or remain in technology?

Li Xunlei: The main theme should still be in the technology sector. For a shift to other sectors to occur, there must be fundamental changes in those sectors—for example, increased fiscal spending at the macro level. Without such fundamental changes, the divergent market pattern will persist.

Based on data from the first half of this year, the profit growth rate of AI companies was the highest among all industries. I remain optimistic about ETFs related to AI or the STAR Market; however, whether individual companies can avoid elimination in this round of technological revolution, or maintain their dominance as strong players get stronger, involves uncertainty. Thus, my view is: the AI track will likely maintain relatively strong momentum, but divergence among individual stocks may also emerge.

Q: Since the beginning of this year, both primary and secondary markets have seen significant fund siphoning by the technology sector. How do you view the impact of this fund siphoning on other industries? When might this trend change? Where might funds flow next?

Li Xunlei: Currently, the "troika" driving economic growth exhibits a pattern of "fast exports, slow domestic demand." Taking investment as an example, overall manufacturing investment showed negative growth, but the electronics, telecommunications, and real estate sectors experienced noticeable stimulus effects. Whether new policies are introduced subsequently will influence asset allocation structures.

Insufficient Medium- and Long-Term Funds in Capital Markets

Q: You have continuously focused on the issue of long-term funds in recent years. Over the past two years, policies encouraging medium- and long-term funds to enter the market have been consistently rolled out. What is your assessment of the current situation regarding their entry into the market? What supporting measures might emerge in the future? Do you have any suggestions?

Li Xunlei: There are still insufficient medium- and long-term funds. Social security funds are long-term funds, and insurance funds are also long-term funds, but public mutual funds do not qualify as long-term funds—they constantly face subscriptions and redemptions. Household deposits are currently very high, while banks...

I believe bank wealth management subsidiaries (i.e., bank wealth management arms) are well-positioned to launch some long-term products. Currently, a large amount of household deposits sits idle in banks, and although the market size is expanding, the volume of long-term funds remains relatively small. Therefore, policies should be further relaxed.

Q: What measures can ensure these funds "can enter and stay"?

Li Xunlei: Such funds require relatively low returns. Given the low return requirements, products akin to "principal-guaranteed" instruments could be issued using bank capital as collateral, which would surely be highly popular. Bank wealth management subsidiaries could then invest these funds in long-term instruments in the capital markets. Some existing instruments already offer high dividend payout ratios and dividend yields, making long-term allocation worth exploring. Compared with Western countries, our share of long-term funds remains relatively low.

Significant Room for Central Fiscal Expansion

Q: Some views suggest resolving cyclical issues in the short term requires greater fiscal effort. If proactive fiscal policies continue, is there still larger room for policy expansion?

Li Xunlei: Fiscal expansion involves two aspects:

1. Enlarging the fiscal "pie" — i.e., further expanding the scale of fiscal expenditures
2. Replacing local government debt with central government borrowing — to lower local debt costs and improve local fiscal cash flows

Only after local government cash flows improve can efforts to boost consumption and expand investment proceed effectively. For instance, if central infrastructure projects require matching local funds—and locals lack such funds—project implementation speed will inevitably slow down.

I believe there is still considerable room for central fiscal expansion. Currently, China's central government leverage ratio is below 30%. Of course, the combined leverage of central and local governments is not particularly low, so accurately speaking, it is the central government that has room for expansion—this has been my consistent view.

Q: What are your policy recommendations for boosting household consumption growth next year?

Li Xunlei: Regarding consumption promotion, I have always believed that trade-in policies need optimization. Currently, the unit prices of items eligible for trade-ins are too high, such as automobiles...

Q: What is your judgment on the economic outlook for the second half of this year and next year?

Li Xunlei: The full-year economic growth target for this year should be achievable; I estimate the annual growth rate at around 4.6%. Next year, a target range of 4.5%–5% will certainly be set again, implying that policy support needs to be intensified—after all, downward pressure on real estate and its related industries continues to significantly affect traditional sectors.

Looking at this year's pace, compared with previous years, fiscal expenditures in the first half were notably slower, resulting in a "high early, low later" pattern for economic growth in the first half. Fiscal spending is expected to accelerate in the third quarter, but once accelerated, forming actual physical workload may take until the fourth quarter. Therefore, the overall judgment is:

• Q3 growth — flat or slightly lower
• Q4 growth — will clearly exceed Q3
• Full-year GDP growth — around 4.6%

Next year, the export engine will slow down but will still make a substantial positive contribution to economic growth. Given the pressures already faced this year, incremental policies for next year may be deployed earlier: fiscal policy may become more robust; monetary policy also has room for interest rate cuts—we advocated for "substantial rate cuts" back in 2024, but over the past two years, actual rate reductions have been limited, leading to persistently declining treasury bond yields. Therefore, I believe there remains room for both fiscal and monetary policies next year.

Source: Securities Times Network