China is entering what Jefferies describes as “an era of the private sector,” with the country shifting from its common prosperity agenda toward “AI & high-tech mfg dominance” under the 15th Five-Year Plan. 

In a strategy note, Jefferies quantitative analyst Mahesh Kedia says the market remains attractive on “PE/G,” with earnings momentum set to accelerate despite expected consolidation.

Jefferies outlined five investment themes for 2026. 

First, the bank highlights “high-growth tech and manufacturing stocks with upgrades,” noting that China’s policy direction has moved decisively toward semiconductors, automation, robotics, biotech, and other advanced industries. 

Jefferies says this “story is still in its early stages,” adding that its high-growth basket is up 89% this year and supported by a remarkable “51% EPS CAGR” with continued upgrades.

Second, Jefferies urges investors to differentiate between “secular upgrades” and downgrades. 

While valuations in parts of the market have related sharply, Kedia points to a broad improvement in earnings revisions, with “46%” of companies now seeing upgrades compared with “22%” in late 2023.