(Yicai) April 7 -- As the US-Iran conflict continues, traditional safe-haven assets, such as gold and US Treasury bonds, which were expected to shine, have instead experienced broad declines. In contrast, Chinese assets have demonstrated remarkable resilience, with the Shanghai Composite Index once climbing above the 3,900-point mark.

Foreign institutions have expressed their views: Neuberger Berman described Chinese assets as an "important strategic base," while Goldman Sachs maintained its "overweight" recommendation on Chinese stocks. There are even indications that international capital has begun to flow back into Hong Kong.

Chinese assets have become a 'safe haven' for four main reasons. The first is that China has a diversified energy structure. The ongoing conflict in the Middle East has the potential to shake global capital markets through rising oil prices. Iran's control over the Strait of Hormuz has resulted in disruptions to about one-fifth of global oil transportation. For economies that are heavily reliant on energy imports, skyrocketing oil prices undoubtedly signal uncontrollable manufacturing costs, deteriorating trade conditions, and collapsing corporate profit expectations, highlighting the immense pressure they face.

In 2024, crude oil and liquefied natural gas accounted for only 28 percent of China's primary energy consumption, one of the lowest globally. In contrast to countries like Japan and South Korea, whose energy dependence on imports exceeded 80 percent, China had a primary energy self-sufficiency rate of 83 percent, according to public data.

The share of alternative energy sources, such as nuclear, wind, solar, and hydroelectric power, in China's total electricity generation increased to 40 percent last year from 26 percent a decade ago. Sales of new energy vehicles accounted for half of domestic automobile sales, and the proportion of non-fossil fuels in the energy consumption structure continues to rise.

The second reason is that the valuation of the Chinese stock market, also known as the A-share market, is at a low point. The Trailing 12 Months Price-to-Earnings Ratio of the Shanghai Composite Index is about 17 times, compared to 27.6 times for the S&P 500, 22.9 times for the Korea Composite Stock Price Index, and 20.9 times for the Nikkei 225. This indicates that, even in the face of external shocks, the downside potential for A-shares is more limited compared to highly valued US stocks, while their potential for upward correction is more abundant.

The third reason is that Chinese supply chains have demonstrated resilience. The conflict in the Middle East has posed serious challenges to the global trade system. For the manufacturing sector, the stability of supply chains and the reliability of deliveries have become more important than pricing.

China has the world's most comprehensive industrial system, capable of achieving a self-circulating full supply chain. At the same time, the country's continuous breakthroughs in high-end manufacturing are reshaping the global supply chain landscape.

In addition, China is not only the world's largest importer of oil and liquefied natural gas but also the largest global investor in alternative energy. Its investments cover power generation, technological innovation, energy infrastructure, and modern petrochemical facilities. This positions it at the lead in the restructuring of global supply chains.

The fourth reason is the strong consistency in China's macroeconomic policies and the optimization of its capital market system. The 15th Five-Year Plan has set the development direction for the economy over the next decade, demonstrating a high degree of policy continuity and strategic execution capability.

China's central bank has recently reiterated its commitment to steadfastly maintaining the stable operation of financial markets, including stocks, bonds, and the foreign exchange field. The multifaceted and sustained policy signals from regulatory authorities provide continuous support for the recovery of market expectations.

Even though Chinese assets as a whole demonstrate safe-haven characteristics, there are also structural differences within. In the current macroeconomic environment, three types of assets are particularly favored by global capital. The first focuses on strategic industries, such as oil and petrochemicals, coal, power generation, transportation, and banking, which are vital to the national economy and directly support energy security. The second comprises technology sectors with global competitiveness, and the third includes China's new energy industry chain.

The transition of Chinese assets to a 'safe haven' role is not an overnight process. International capital flowing into China is still in the initial stages, and the scale of these inflows does not necessarily translate directly into the stock market. Instead, they are mostly strategic allocations in the primary market and moderate increases in long-term capital investments.

(The author is Fu Yifu, a senior researcher at Shanghai Star Atlas Financial Services Group.)

Editor: Futura Costaglione