Analysis on Reconstructing A-Share Investment Strategy for 2026 Under the Divergence of Sino-US Monetary Policies

1. Policy Background and Interest Rate Differential Structure
   : After the Federal Reserve’s third interest rate cut in December 2025, the target range of the federal funds rate dropped to 3.50%-3.75%[1]. During the same period, China’s 1-year LPR remained at 3.00% for seven consecutive months, with the monetary policy stance being ‘moderately loose’[2]. The Sino-US interest rate differential shows a dual structure: short-term positive (Fed rate > China’s LPR) and inverted 10-year Treasury yields (China’s 1.83% < US’s 4.12%)[3].
2. Capital Flows and Exchange Rate Trends
   : In the second half of 2025, foreign capital turned from net outflow to net inflow, and the RMB exchange rate broke through the 7.05 mark, supported by trade surpluses, but long-term depreciation pressure still exists[3].
3. Central Bank Policy Responses
   : The Central Economic Work Conference clearly stated that it will flexibly use various monetary policy tools, and in 2026, it will pay more attention to structural tools to guide capital flows to areas such as technological innovation and green development[2][4].
4. Sector Performance and Institutional Expectations
   : In 2025, growth sectors such as AI computing power and high-end manufacturing performed excellently, with the Shenwan Nonferrous Metals Index rising by 77.71%[5][7]. Institutions expect growth sectors to maintain high prosperity in 2026; ‘China Special Valuation’ assets, as low-valued and high-dividend assets, have become defensive allocation options, and the barbell allocation strategy of ‘high-dividend bottom position + growth dividend’ has become a consensus[5][6].

1. Policy ‘Combination of Tools’ Balances Multiple Goals
   : The central bank uses structural tools instead of across-the-board interest rate cuts, which not only avoids exacerbating capital outflow and exchange rate pressures but also precisely supports strategic growth sectors[2][4].
2. ‘Barbell’ Allocation Adapts to the Environment
   : Growth sectors capture dividends from policy support and industrial upgrading, while ‘China Special Valuation’ provides a defensive buffer; this strategy balances risks and returns against the backdrop of interest rate differential trading and capital outflows.
3. Interest Rate Differential Narrows but Structure Continues to Affect Capital Flows
   : Although the inverted 10-year interest rate differential has narrowed, short-term interest rate differentials still affect cross-border capital allocation, and attention should be paid to the pace of the Federal Reserve’s interest rate cuts in 2026[1][3].

1. Uncertainty in the Fed’s Interest Rate Cut Path
   : Investment banks have large differences in forecasts of the number and magnitude of interest rate cuts in 2026, which may change the trend of Sino-US interest rate differentials[1].
2. RMB Exchange Rate Volatility Risk
   : Uncertainty in Sino-US relations may trigger exchange rate fluctuations[3].
3. Valuation Risk of Growth Sectors
   : Valuations of sectors such as AI and high-end manufacturing are at high levels, and attention should be paid to profit realization[6].

1. Policy-Supported Growth Tracks
   : Areas such as high-end manufacturing, AI applications, green energy, and biomedicine benefit from structural tool support and have significant long-term growth potential[2][4][5].
2. Defensive Allocation Value of ‘China Special Valuation’
   : Its high-dividend and low-valuation characteristics attract stable capital, and it has allocation advantages under capital outflow pressure[6][7].

Against the backdrop of the divergence of Sino-US monetary policies, A-share investment in 2026 needs to focus on:

1. The guiding role of the central bank’s ‘combination of tools’ and structural tools on capital flows.
2. The continuous impact of the Sino-US interest rate differential structure on capital flows and exchange rates.
3. Adopting a ‘barbell’ allocation strategy that balances growth sectors and ‘China Special Valuation’ assets.
4. Being vigilant about the Fed’s policy uncertainty, exchange rate fluctuations, and valuation risks of growth sectors.