Dialogue with Tian Xuan from Peking University Guanghua: Global capital "looks east," with a safety premium and risk-averse market behaving very differently

Ask AI · How does the safety premium reshape the valuation logic of innovative companies?

**21st Century Business Herald · Reporter Cui Wenjing **Recently, there has been a leadership change at Peking University’s Guanghua School of Management. Tian Xuan, a representative to the 14th National People’s Congress and a Boya appointed professor, has taken over as dean, succeeding Liu Qiao.

Previously, at the first moment after Tian Xuan assumed the new role, a 21st Century Business Herald reporter conducted an exclusive interview with him.

“Chinese assets are being labeled in the securities market with a ‘safety premium.’ What is a ‘safety premium’? How is it different from traditional safe-haven assets such as gold and government bonds? With the A-share market now moving into an independent trend, how can ordinary investors seize opportunities?

In the interview, Tian Xuan pointed out that China’s assets’ safety premium is not simply a hedging logic; rather, it comes from stable macro fundamentals, strong institutional resilience, the massive scale of the domestic market, and the capability for ongoing industrial upgrading. It is different from the “passive defense” of traditional safe-haven assets. Instead, it is a kind of actively constructed, endogenous growth momentum and economic resilience.

Tian Xuan further analyzed that the “triple support of energy security, export advantages, and liquidity incrementality” does have a realistic basis. But deeper factors come from the demand resilience created by a massive market, the talent pool reserves, ongoing breakthroughs in technology under the “new-type nationwide system for pooling resources to tackle major national goals,” and institutional opening-up. At the same time, the institutional change in the capital markets—from “financing first” to “a balanced approach to investment and financing”—also provides underlying support for the safety premium.

Regarding the current independent trend shown by the A-share market, Tian Xuan believes that behind it lies an increase in strengthened endogenous resilience and a weakening of external pricing power, and that events such as geopolitical conflicts may accelerate global capital’s “turn eastward.”

21st Century: From an academic perspective, how do you define the “safety premium” of Chinese assets, and what is the fundamental difference from traditional safe-haven assets?

Tian Xuan: The safety premium of Chinese assets refers to the comprehensive premium through which, amid rising global uncertainty, Chinese assets provide the global capital with unique value of certainty—backed by stable macro fundamentals, strong institutional resilience and policy resolve, the massive scale of the domestic market, and the capability for continuous industrial upgrading.

It has a fundamental difference from traditional safe-haven assets. Traditional safe-haven assets such as gold and government bonds rely on a passive-defense logic. In contrast, the safety premium of Chinese assets arises from actively building endogenous growth momentum and a system-wide ability to withstand pressure and maintain economic resilience. This premium is not about short-term risk avoidance; it reflects recognition of China’s long-term potential for high-quality growth and its ability to withstand risks.

21st Century: Some institutions attribute China’s assets’ “safety premium” to “energy security, export advantages, and liquidity incrementality.” How should this be viewed?

Tian Xuan: The “triple support” of “energy security, export advantages, and liquidity incrementality” indeed has some real-world basis. Energy security relies on independent technological breakthroughs (such as the new-energy industrial chain). Export advantages come from coordinated synergy across the entire industrial chain and improvements in total factor productivity. Liquidity incrementality reflects the adequacy and forward-looking nature of the policy toolbox.

But I believe the deeper support factors lie in the stronger demand resilience brought by China’s massive market, the technological innovation and industrial upgrading capabilities provided by a rich talent pool, continuous breakthroughs in key core technology under the “new-type nationwide system for pooling resources to tackle major national goals,” and the formation of a virtuous interaction mechanism between domestic and international “dual circulation” created by institutional opening-up.

21st Century: How do you evaluate the institutional change in the capital markets shifting from “financing priority” to “a balanced approach to investment and financing”? Does it constitute underlying assurance for the safety premium of Chinese assets?

Tian Xuan: The institutional transformation of the capital markets—from “financing priority” to “a balanced approach to investment and financing,” and from “scale orientation” to “investor return orientation”—fundamentally reshapes the value link between the capital markets and the real economy, making market pricing reflect more truthfully companies’ ability to create long-term value.

This institutional evolution indeed constitutes the underlying institutional assurance for the safety premium. It not only strengthens the quality of information disclosure and corporate governance, but also, through mechanisms such as dividend constraints, delisting optimization, and ESG integration, internalizes investor returns into institutional rigidity requirements.

At the same time, this institutional evolution not only enhances market trust, but also forces listed companies to focus on their core businesses, improve the quality of profitability, attract long-term capital to the market, and solidify the foundation of market integrity and value. As a result, the safety and predictability of Chinese assets are significantly enhanced, thereby forming a distinctive “safety premium.”

21st Century: What “new characteristics” are the current A-share market, Hong Kong stock market, and global stock markets showing? Are there similar stages in history that can be used as references?

Tian Xuan: The current A-share market shows an independent trend and a certain degree of downside resilience, with the correlation to global stock indices continuing to decline. This benefits from factors such as domestic stable-growth policies taking effect, the acceleration of the repair in domestic demand, and the fact that valuations of renminbi-denominated assets are at historic lows.

The independence of the A-share market is not a short-term disturbance. It is a dual reflection of strengthened endogenous resilience and weakened external pricing power, exhibiting structural features in which policy leadership and market endogenous momentum coexist. The Hong Kong stock market, meanwhile, is affected by a dual impact—disturbances to expectations for external liquidity and improvements in the Mainland’s economic fundamentals—thus showing high elasticity. Valuation-repair momentum is strong, but volatility remains relatively high. Globally, amid the repeated flare-ups of inflation and the interweaving of geopolitical risks, overall risk appetite is under pressure, and market differentiation is pronounced.

Historically, during the period from late 2018 to mid-2019, when U.S.-China trade frictions intensified, the A-share market also managed to run an independent trend amid global market turbulence. At that time, the global market fell due to heightened trade tensions, while the A-share market, supported by domestic policy cushions and valuations, held up relatively well.

However, today’s independence is becoming even more robust. It stems not only from policy cushions, but also from improved endogenous stability brought by deeper economic structural transformation, the continued push for deeper reforms of the capital markets, and the acceleration of renminbi internationalization.

21st Century: How do geopolitical events affect global investors’ risk appetite? Will they accelerate the “turn eastward” and reinforce foreign investors’ demand for allocating to Chinese assets?

Tian Xuan: Geopolitical events usually boost global safe-haven sentiment and cause capital to flow into assets with high credit quality and low volatility. When geopolitical conflicts such as those in Iran intensify, they reinforce fluctuations in energy prices and supply-chain risks, strengthening global capital’s preference for “stability.” Meanwhile, renminbi assets, by virtue of their relatively independent economic cycle, continuously improving institutional environment, and the ever-expanding benefits of openness, will become an important new option for safe-haven allocation.

Especially against the backdrop of China’s economy stabilizing and recovering, a rich policy toolbox, continuous issuance of favorable policies, and increasingly sound basic institutions for the capital markets, the safety premium effect of Chinese assets becomes even more pronounced, and foreign capital’s logic for allocating to Chinese assets is shifting from “short-term game-playing” to “long-term holding.”

21st Century: How should the impact of the safety attributes of Chinese assets on the valuation logic of innovative companies be understood? Do innovative companies also enjoy a “safety premium”?

Tian Xuan: In the context of global capital rebalancing, the safety attributes of Chinese assets indeed drive changes in the valuation logic for innovative companies.

On the one hand, driven by hedging demand, global capital is more keen on “hard-tech” companies with stable cash flows and stronger anti-cyclical capabilities, such as leading companies in areas including semiconductor equipment, industrial machine tools, and foundational software.

On the other hand, as policy continues to intensify support for tackling key core technology breakthroughs, together with institutional optimization at the Beijing Stock Exchange and the Sci-Tech Innovation Board, the market’s ability to price these companies based on long-term certainty has improved markedly.

These companies are no longer viewed only as high-risk growth targets; instead, they are both strategic-value carriers and “core assets” with a safety-oriented foundation. This means that the valuation logic for innovative companies is shifting from discounting only growth to a dual valuation of growth and safety premium. If innovative companies can deeply bind technological breakthroughs with national security and the resilience of industrial chains, they will be able to enjoy a “safety premium” as well.

21st Century: How should you grasp the allocation logic of “safe assets”? What insights does the “SMART” framework provide?

Tian Xuan: For ordinary investors, “safe assets” are not simply equivalent to low valuations or high dividend yields. Instead, they refer to companies that have real technological barriers, clear industry positioning, and stable earnings capacity. The core of their value lies in non-replaceability and long-term certainty.

In terms of industry selection, you should focus on sub-sectors where domestic substitution is accelerating, policy support is clear, and cash flows can be verified; when considering valuation, you need to avoid short-term hype-driven price spikes and choose individual stocks whose valuations fall within historically reasonable ranges and whose earnings growth rates match; regarding the investment cycle, stick to medium- and long-term allocations and reduce interference from short-term volatility.

The “SMART” stock-picking framework emphasizes selecting companies with a strong strategic fit, steady operations, sufficient cash flows, deep technological barriers, reasonable valuations, and strong anti-cyclical capability. At the same time, by referencing institutional fund flow trends and sustained performance, you can construct an investment portfolio that combines both safety and growth.

21st Century: Which sectors benefit the most from “safe assets”?

Tian Xuan: In the opening year of the “14th Five-Year Plan,” I believe the biggest beneficiaries will be three types of assets: core components and foundational software in hard-tech fields, leading advanced-manufacturing companies with global supply-chain discourse power, and key links whose energy and strategic resources are independently controllable.

These areas will not only benefit directly from policy tilt and capital concentration, but will also continue to strengthen their moats through technological iterations and global competition. Especially in fields such as semiconductor equipment, industrial machine tools, reliable-and-innovative information technology foundational software, oil and gas resource exploration and development, energy storage technologies and the green electricity industry chain, core algorithms for artificial intelligence, high-end equipment, and biopharmaceuticals, there will be a deeper round of safety-premium revaluation.

21st Century: Is there a risk of excessive pricing for a “safety premium”? Which reversal variables should we be vigilant about?

Tian Xuan: The “safety premium” itself is a rational revaluation of deterministic value by the market. However, if a large amount of short-term hedging capital floods in, it could indeed generate localized valuation bubbles. In particular, when the pace of earnings delivery lags behind market expectations, it may trigger market pullbacks and structural differentiation.

Investors need to watch three categories of variables: first, sudden changes in the external environment—such as the U.S. Federal Reserve shifting monetary policy toward rate hikes, or easing of global geopolitical conflicts—which could reduce the relative safety advantage of Chinese assets; second, domestic economic fundamentals weakening more than expected, leading to pressure on corporate earnings and weakening support for the premium; third, large swings in cross-border capital flows, combined with changes in exchange-rate expectations, which may cause safe-haven capital to flow back and intensify market volatility.