UBS's Fang Dongming: Foreign Allocation to Chinese Assets Is an Overriding Trend as RMB Shows Safe-Haven Traits

Amid rising global market volatility and investors' search for a new "safe haven," Chinese assets are drawing increasing attention. Fang Dongming, head of China at UBS Global Financial Markets, said in a recent interview that safe-haven assets typically share two attributes: low correlation with global risk assets, and sufficient market depth for easy entry and exit.

He believes 2026 could be a banner year for foreign allocation to Chinese assets, driven mainly by a turning point in China's economic cycle — an appreciating renminbi, a shift from deflation to inflation, and a gradual recovery in prices. The AI industry chain has become the main theme for foreign buying, with the QFII scheme and the Stock Connect channels complementing each other, while Hong Kong plays an indispensable role in the global pricing of Chinese assets. The next five years could become a "golden five years" for foreign allocation to Chinese assets.

Chinese assets are showing safe-haven attributes

China Fund News: Why do you describe Chinese assets as a "safe haven" — a term usually referring to US Treasuries or gold? What is the logic behind it?

Fang: Safe-haven assets typically have two important attributes: first, low correlation with global risk assets, meaning they hold up or offer defense when other assets fall sharply; second, a deep enough market that makes it easy for investors to enter and exit.

Viewed from these two angles, Chinese assets increasingly combine low risk with relatively high accessibility for overseas investors. But this did not happen overnight — during several episodes of global market turbulence this year, Chinese equities also showed a degree of correlation. Relatively speaking, the renminbi and China's bond market have demonstrated better safe-haven characteristics and remained quite stable.

China Fund News: You previously said 2026 would be a big year for overseas investors to increase allocations to Chinese assets. Beyond valuation advantages, what is the "China story" that most appeals to global long-term capital right now?

Fang: After more than 30 years of continuous opening-up, China's capital markets are now highly accessible to global investors. The most critical reason I called this a big year for foreign allocation to Chinese assets is the turning point in China's economic cycle: renminbi appreciation, the shift from deflation toward inflation, and a gradual recovery in prices — these fundamental factors are driving overseas investors to keep increasing their holdings of Chinese assets.

Looking at the data, both medium- and long-term overseas investors have increased allocations to varying degrees, but overall they remain in a watching stage, and the room for further increases is worth anticipating. This is not limited to 2026 — overseas investors may continue adding to Chinese assets in the years ahead.

China Fund News: Between now and year-end, will the pace of foreign buying of A-shares keep accelerating, or slow somewhat?

Fang: Net inflows were strong in the first half of 2026, though there was a modest pullback in July due to market volatility (high-frequency data may not be entirely accurate).

We are cautiously optimistic about overseas investors adding to China and A-shares over the next four months, with three main drivers: first, earnings support — UBS strategists have raised their A-share earnings growth forecast from 11% to 15%; second, the technology and AI industry chain, which enjoys high global investor attention as China's investment in technological innovation and its drive for self-reliance amid geopolitical tensions continue to attract global capital; third, policy stimulus.