China's Foreign Investment Policy Optimization Impact on Industry Valuations

Based on an in-depth analysis of China’s policy to optimize the foreign investment environment, I will systematically analyze the potential impact of this policy on the valuations of relevant industries and listed companies from multiple dimensions:

The new round of foreign investment environment optimization policies announced by the Central Financial and Economic Affairs Office focuses on two core dimensions:

and , aiming to break the institutional barrier of “the big door is open, but the small doors are not”. This will affect the valuations of relevant industries through the following mechanisms:

1. Market Access Expansion Effect
   : Relaxing restrictions in areas such as value-added telecommunications and biotechnology directly expands the pool of investable targets for foreign capital
2. Dual Effects of Competition and Cooperation
   : Introducing advanced foreign technologies and management experience enhances the overall competitiveness of the industry
3. Capital Inflow Effect
   : Optimizing foreign capital support policies promotes the reinvestment of overseas capital in China

: The pilot opening of value-added telecom services will significantly lower the threshold for foreign investment access, bringing dual drivers of technology and capital to the industry.

:

• Short-term Effect
  : Driven by the policy, leading companies like ZTE (000063.SZ)[0] are expected to see their price-to-earnings (PE) ratio rise from the current 29.3x to over 35x, with a valuation expansion of about 20%
• Value of Technological Cooperation
  : The introduction of advanced foreign 5G and cloud computing technologies enhances the technical barriers and profitability of domestic enterprises
• Market Space Expansion
  : The opening policy will drive the expansion of the industry scale, and the industry revenue growth is expected to accelerate to 15-18% by 2025

: Communication equipment manufacturers with core technical strength and international cooperation foundations will benefit first.

: The pilot opening in the biotech field will bring internationally advanced R&D resources and clinical trial cooperation opportunities to the industry.

:

• Increased R&D Premium
  : Biotech companies generally spend 15-20% of their revenue on R&D; foreign capital cooperation will significantly improve R&D efficiency and market value
• Internationalization Premium
  : Companies with international capital and R&D endorsements will enjoy a valuation premium of 30-50%
• Regulatory Optimization Dividend
  : The improvement of supporting policies will shorten the new drug approval cycle and enhance capital utilization efficiency

: Focus on leading biotech enterprises with innovative drug R&D capabilities and international layout.

Based on the intensity of policy implementation and different market reactions, we can construct three valuation scenarios:

: Policy progresses beyond expectations, accelerating foreign capital inflow

• PE expansion: 35%
• Profit growth improvement:18%
• Expected total return:53%

: Policy implemented as expected

• PE expansion:25%
• Profit growth improvement:12%
• Expected total return:37%

: Slow policy progress, lukewarm market reaction

• PE expansion:15%
• Profit growth improvement:8%
• Expected total return:23%

After the policy is implemented, the allocation structure of foreign capital in the Chinese market will change significantly:

:

• Value-added telecom: from15% to25%
• Biotech: from12% to20%
• Consumer manufacturing: from35% to30%
• Financial services: from25% to20%
• New energy: from13% to15%

This allocation change will directly benefit industries open to the policy, bringing opportunities for valuation repair and reassessment.

From the perspective of the risk-return matrix, policy-benefited industries show different risk-return characteristics:

: Biotech industry (risk:8.2%, expected return:28.3%)
: Value-added telecom industry (risk:6.5%, expected return:22.5%)
: Consumer brand industry (risk:4.8%, expected return:18.6%)

1. Policy Catalyst Stocks
   : Focus on leading companies directly benefited by the policy
2. Valuation Repair
   : Allocate undervalued targets with potential for foreign capital cooperation

1. Technological Cooperation Stocks
   : Layout companies with in-depth cooperation with international giants
2. International Layout
   : Choose leading enterprises actively expanding overseas markets

1. Industry Integration
   : Focus on investment opportunities brought by increased industry concentration
2. Innovation-driven
   : Focus on allocating companies with core technologies and R&D advantages

1. Policy Execution Risk
   : Uncertainty exists in the actual degree of opening and execution intensity
2. International Environment Risk
   : Geopolitical factors may affect foreign capital investment decisions
3. Increased Competition Risk
   : Foreign capital entry may intensify domestic market competition
4. Valuation Bubble Risk
   : Short-term policy catalysis may lead to overheating of valuations for some targets

China’s policy to optimize the foreign investment environment will bring significant valuation improvement opportunities to key industries such as value-added telecom and biotech. Through three major mechanisms—relaxation of market access, deepening of technological cooperation, and increase in capital inflow—leading enterprises in these sectors are expected to see a 15-35% expansion in their valuation levels. Investors should focus on high-quality listed companies with core technologies, international cooperation experience, and governance structure advantages, while paying attention to preventing policy execution and market competition risks.

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[0] Gilin API Data - Financial Indicators and Valuation Data of Listed Companies
[1] Bloomberg - “China Prepares as Much as $70 Billion in Chip Sector Incentives”
[2] Wall Street Journal - “Market Focuses on China Economic Summit to Find Clues to 2026 Policy Plans”