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China-US trade talks, market resilience boost confidence in Chinese assets(Global Times) 11:32, May 14, 2025
China's capital market is witnessing a wave of positive developments. Just days after Chinese policymakers issued major policy measures to stabilize the market, China and the US announced on Monday that the two countries have reached what has been described by some as a better-than-expected breakthrough to ease tariff tension.
With the growing positive headlines come greater confidence in Chinese assets. Some global financial institutions have moved swiftly to raise their outlooks for Chinese stocks, while others are making adjustments to their investment strategies to focus on Chinese high-tech stocks.
While the outcome of the China-US trade talks offered a significant boost, China's policy orientation, market resilience, and technological breakthroughs in areas such as artificial intelligence (AI) and semiconductors are underpinning the long-term growth potential of Chinese assets, according to analysts and reports from several major global financial institutions.
Near-term catalyst
"We see this development as a solid near-term catalyst for the China market," Laura Wang, chief China equity strategist at Morgan Stanley, said in a research note shared with the Global Times on Monday, referring to the agreement reached between China and the US.
Following two days of talks in Switzerland, China and the US released a joint statement on Monday, announcing several key agreements, most notably a significant reduction in tariffs on both sides.
Specifically, the US will remove a total of 91-percent additional tariffs on Chinese products, and China will accordingly cut 91-percent countermeasure additional tariffs against US imports. In addition, the US will suspend a 24-percent "reciprocal tariff" for 90 days, and China likewise will suspend a 24-percent countermeasure tariff for the same period, according to the Ministry of Commerce.
"This news greatly boosted the confidence of the global capital market," Yang Delong, chief economist at Shenzhen-based First Seafront Fund, told the Global Times on Tuesday, noting global markets have responded positively to the news.
Wang Tao, head of Asia economics and chief China economist at UBS Investment Bank, said in a statement sent to the Global Times on Tuesday that "the trade war de-escalation improves growth outlook."
The closely watched US-China trade talks concluded with "substantial progress" on reducing bilateral reciprocal tariffs significantly, which is more positive than many had expected, Wang said.
Song Yu, chief China economist at BlackRock, told the Securities Times that the recent progress in China-US trade relations is a significant boost to the macroeconomic environment.
This, combined with the stronger-than-expected April export data and intensified domestic economic policy support, as evidenced by the comprehensive package of policies rolled out by three major Chinese government departments last week, is expected to "bolster the confidence of both domestic and international investors in Chinese assets, acting as a powerful catalyst for the Chinese market," Song said.
Strong resilience
Even before China and the US reached major progress in the trade talks, global investors had already become increasingly bullish on the investment prospects of China's capital market, expressing strong confidence in its strong resilience and long-term growth potential.
Some major financial institutions have been quick to adjust their investment strategies. UBS Global Wealth Management issued its investment views on Monday, expressing preference for leading internet companies driving AI development in China and attractive opportunities across the broader semiconductor supply chain.
"We believe the continued breakthroughs in China's AI space should help drive the tech sector higher amid signs of a potential de-escalation in the US-China trade war. We now rate Chinese tech stocks as 'Attractive,' and expect the sector to post an earnings growth of 30 percent this year," the wealth management firm said.
In the research note on Monday, Wang from Morgan Stanley also noted "structural investment opportunities in tech/artificial intelligence and new consumption related areas."
In a May 8 report, Goldman Sachs maintained its "overweight" rating on Chinese equities and raised its 12-month index targets for MSCI China and CSI300 to 78 and 4,400, implying 7 percent and 15 percent potential returns.
The report noted that Chinese financial assets have remained resilient, supported by factors such as broad US dollar weakness, signs of easing US-China trade tensions, robust activity growth as shown in hard data, and effective domestic policy easing.
Last week, China's monetary and financial authorities unveiled a raft of supportive measures, including policy rate and reserve requirement ratio (RRR) cuts, as the country stepped up efforts to stabilize markets and sustain economic recovery amid external headwinds, according to Xinhua.
