Goldman Sachs Introduces China’s “Top Ten Giants” to Rival the U.S. “Magnificent Seven”

Goldman Sachs recently released a series of research reports highlighting the resurgence of China’s private sector. The firm introduced the concept of China’s “Top Ten Giants,” a group of companies it sees as counterparts to the U.S. equity market’s “Magnificent Seven.” These ten private firms—spanning technology, consumer goods, and manufacturing—are seen as pivotal players in China's long-term equity growth. They are expected to drive forward the country’s economic transformation by leading in areas such as AI innovation, global expansion, and consumption upgrades.

The ten companies identified as China’s “Top Ten Giants” are Tencent, Alibaba, 小米 (01810.HK), BYD (002594.SZ), Meituan (03690.HK), NetEase (09999.HK), Midea (000333.SZ), 恒瑞医药 (Jiangsu Hengrui Medicine, 600276.SH), Trip.com (09961.HK), and Anta Sports (02020.HK). These companies have a combined market capitalization of USD 1.6 trillion and account for 42% of the MSCI China Index’s total weight. Their collective daily trading volume reaches USD 11 billion. Together, they reflect China’s new growth priorities—from cutting-edge technology and domestic innovation to outbound expansion and higher-value consumer demand.

Goldman Sachs forecasts that these ten firms will achieve a compound annual earnings growth rate of 13% over the next two years. They currently trade at an average forward P/E ratio of 16 and carry a forward PEG (fPEG) ratio of 1.1, both of which indicate attractive valuation levels when compared to the U.S. “Magnificent Seven,” which trade at a P/E of 28.5 and fPEG of 1.8. Since their 2022 lows, these ten stocks have risen by 54%, and are up 24% so far this year, outperforming the broader MSCI China Index by 33 and 8 percentage points, respectively.

Goldman Sachs' Chief China Equity Strategist, Liu Jinjin, emphasized in a recent report that the outlook for China’s private enterprises is improving across multiple dimensions—macro, policy, and micro. After peaking in 2020, the private sector experienced a sharp correction, with market capitalization dropping by USD 4 trillion and underperforming state-owned enterprises (SOEs) by 56 percentage points. However, since bottoming out in 2022, private enterprise profits have rebounded by 22%, and return on equity has risen by 1.2 percentage points. Despite these improvements, valuations remain low while shareholder return rates have reached historic highs, indicating strong fundamentals with room for re-rating.

Recent policy developments have further improved sentiment toward private firms. Notably, the February 17 private sector forum and the passage of the Private Economy Promotion Law on April 30 were seen as major milestones. According to Goldman Sachs’ proprietary policy intensity gauge, the current regulatory environment is the most supportive it has been in the last five years. These signals suggest a more predictable and growth-friendly climate for private sector development.

In addition, Goldman Sachs believes the market structure in China is shifting toward higher industry concentration, with leading private enterprises likely to capture a larger share of profits and growth. The firm notes that China has the lowest market concentration among major economies, with its ten largest listed companies accounting for only 17% of total market capitalization, compared to 33% in the U.S. and 30% in other emerging markets (excluding China). As regulatory frameworks related to anti-monopoly practices and M&A become more transparent, the path is clearer for both organic growth and strategic expansion by leading firms.

The companies identified by Goldman Sachs already dominate in key indicators such as profitability, capital expenditure, and R&D investment—factors strongly correlated with long-term industry leadership and return potential. Many of these firms are also early adopters and developers of artificial intelligence, with robust customer bases, data capabilities, and financial strength. These traits position them to lead the AI transformation, which Goldman Sachs estimates could add 2.5% to annual earnings across Chinese companies over the next decade, potentially boosting fair market value by 15–20% and attracting more than USD 200 billion in additional capital inflows.

Global expansion is another key growth driver. The proportion of overseas revenue among Chinese private enterprises has increased from 10% in 2017 to 17% in 2024, with some firms—such as BYD—achieving overseas gross margins of 30%, even higher than their domestic performance. Goldman Sachs argues that firms with sound fundamentals and global reach will benefit from enhanced revenue growth, greater profitability, and stronger economies of scale.

Valuations for these top private firms remain appealing. The average 12-month forward P/E ratio is just 13.9, only 22% higher than the MSCI China Index, a sharp decline from the 74% premium recorded in 2021. In contrast, the U.S. “Magnificent Seven” currently trade at a 43% premium over the broader market. If the Chinese market's concentration were to increase to levels comparable to the U.S., the share held by the top ten firms could rise from 11% to 13%, translating into a USD 313 billion uplift in market capitalization.

Goldman Sachs also sees rebalancing opportunities within global investment portfolios. Of the 496 global mutual funds with exposure to China, 86%—managing a combined USD 0.9 trillion in assets—remain underweight on Chinese equities. A move to equal-weight exposure could drive up to USD 44 billion in inflows. In addition, the rapid expansion of China-focused ETFs in recent years signals sustained passive capital inflow, which is expected to favor large-cap private firms due to their significant index representation and high liquidity.

Ultimately, the “Top Ten Giants” represent a strategic shift in how investors might approach Chinese equities going forward. As fundamentals recover, policies become more supportive, and long-term growth narratives take shape around AI, globalization, and domestic consumption upgrades, these ten private companies are poised to lead China’s next wave of capital market development. Goldman Sachs concludes that this transformation offers long-term investors a compelling opportunity to reallocate capital toward resilient, innovative, and increasingly global Chinese enterprises.