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. Overseas developments are impacting global capital sentiment and also provide an important lens through which to understand Chinese assets.

The Federal Reserve, under the anticipated leadership of the newly nominated Chair Kevin Warsh, is signaling a key turning point in global monetary policy. Understanding his policy philosophy is central to grasping the future environment for global liquidity and the logic of asset pricing. His approach can be accurately summarized as "dovish on rate cuts, hawkish on QE."

Warsh's policy thinking consistently revolves around "cutting interest rates without expanding the balance sheet." He firmly believes the U.S. economy can continue expanding without inflation spiraling out of control and is a strong proponent of AI-driven productivity gains. While his pace of interest rate cuts may not be as aggressive as some, he will still steadily guide the policy rate towards a neutral level—a stark contrast to the recent stance signaling the end of the cutting cycle.

Conversely, Warsh has historically been cautious regarding quantitative easing policies: 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 keep government bond issuance costs low, necessitating future coordination with the Treasury Secretary.

Overall, his policy focus 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 industry bubble burst or a Treasury market liquidity crisis—he would likely not hesitate to activate crisis response measures. However, during stable periods, he prefers the Fed to return to its statutory dual mandate of price stability and maximum employment, ceding more responsibility for economic stabilization to fiscal policy.

Notably, a core主张 of Warsh and his influential policy circle is to re-establish clearer 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-termly distorted capital allocation, fueled asset bubbles, exacerbated wealth inequality, and to some extent contributed to industrial hollowing-out. Therefore, the balance sheet policy under a Warsh-led Fed will tend towards "stabilization" or even "prudent contraction," with large-scale asset purchases unlikely unless a major crisis threatens financial system stability.

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

From a global allocation perspective, the valuation and allocation weight of Chinese assets remain at relatively low levels. This presents a sharp contrast to other major global markets, particularly U.S. 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 constitutes a strong attraction. Simultaneously, in the current era, driven by technological innovation and the global operations of Chinese enterprises, China's capital market is poised to nurture a cohort of excellent companies, forming a new core of Chinese assets.

For investors, this implies reducing reliance on expectations of rampant liquidity and focusing more intently on 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.