The past year saw global markets oscillate between expectations and reality. As we enter 2026, the inaugural year of China's 15th Five-Year Plan, we stand at a critical juncture of paradigm shifts in global macroeconomics and policy. International developments are influencing global capital flows and also provide an important lens through which to assess Chinese assets.

The Federal Reserve, under the anticipated leadership of new Chair nominee Kevin Warsh, is signaling a pivotal turn in global monetary policy. Understanding his policy philosophy is key to grasping the future global liquidity environment and asset pricing logic, which can be precisely summarized as "dovish on rate cuts, hawkish on QE."

Warsh's approach consistently revolves around "cutting rates without expanding the balance sheet." He firmly believes the US economy can continue expanding without runaway inflation and is a staunch supporter of AI-driven productivity gains. Although his pace of interest rate reductions may not be as aggressive as some, he will still steadily guide policy rates toward a neutral level—a stark contrast to the recent stance of Chair Powell, who hinted that the cutting cycle has ended.

Conversely, Warsh has historically been cautious regarding quantitative easing. He explicitly opposes using QE as a conventional counter-cyclical tool and even advocates for further balance sheet contraction during periods of economic stability. This stance creates a misalignment with the Treasury Department's desire to lower government bond issuance costs, necessitating future coordination with the Treasury.

Overall, his policy core will involve parallel progress on "interest rate normalization" and "balance sheet stabilization." Should the economy or financial markets face major turmoil—such as an AI sector bubble burst or a Treasury market liquidity crisis—it is believed he would not hesitate to activate crisis measures. However, during stable times, he prefers the Fed to refocus on its dual statutory mandates of price stability and maximum employment, returning more responsibility for economic stabilization to fiscal policy.

Notably, a core主张 of Warsh and his influential policy circle is to redraw the boundaries between monetary and fiscal policy. They argue that the normalization of QE over the past decade, while providing short-term demand boosts during crises, has long-term consequences: it distorted capital allocation, fueled asset bubbles, exacerbated wealth inequality, and contributed to industrial hollowing-out. Therefore, the balance sheet policy under a Warsh-led Fed will tend towards "stabilization" or even "prudent contraction," and large-scale asset purchases will not be轻易 initiated barring a major crisis threatening financial system stability.

Against the backdrop of this shift in global central bank liquidity paradigms, the "anchor" for asset pricing is being reset. As the previous tide of cheap, abundant global dollar liquidity recedes, the true quality and intrinsic value of assets will become a more critical measure of their price. In this context, certain Chinese assets are entering a favorable window for value reassessment.

From a global allocation perspective, the valuation and allocation weight of Chinese assets remain relatively low. This creates a sharp contrast with other major global markets, particularly US stocks, which face high valuation constraints after a prolonged bull market. As the Fed's accommodative stance marginally weakens and global capital's tolerance for high valuations decreases, this significant "valuation gap" itself becomes a powerful attraction. Furthermore, in the current era, driven by technological innovation and the global operations of Chinese enterprises, China's capital markets are poised to produce a cohort of excellent companies, forming a new core of Chinese assets.

For investors, this implies reducing reliance on expectations of abundant liquidity and focusing more intently on underlying asset value. As the old model recedes, the foundation for new growth—genuinely driven by innovation, efficiency, and value—will become more solid. The value of Chinese assets is poised to become increasingly prominent throughout this process.