China markets 2025: AI boost, trade tensions and what’s next

Policy support aims for 5% growth target

Monetary easing measures

Beijing has pledged substantial policy support to help the Chinese economy achieve its 5% growth target for 2025. The latest monetary easing measures included reductions in policy rates and reserve requirement ratios.

Sector-specific support

Specialised lending facilities were introduced to support key sectors including technology and real estate. These targeted measures aim to address specific challenges facing different industries while maintaining overall economic stability.

Challenges in policy impact

However, these policies primarily focus on injecting liquidity into the financial system rather than addressing fundamental issues of depleted credit demand. The Chinese economy has remained in deflationary territory since February based on year-on-year (YoY) consumer price comparisons.

Markets generally expect additional stimulus measures, including fiscal policies, to help China navigate the dual challenges of domestic consumption weakness and external trade uncertainty. The effectiveness of these measures will be crucial for sustaining market momentum.

Trade negotiations create market volatility

The temporary reduction in tariffs following the Geneva meeting has provided short-term relief for equity markets. However, escalating tensions continue as the US revoked Chinese student visas and tightened restrictions on AI products.

Impact of global trade policies

Manufacturing data reveals the impact of deteriorating trade conditions, with the Caixin Manufacturing purchasing managers’ index (PMI) falling to 48.3 in May – the lowest reading since September 2022. This contraction reflects declining supply and demand driven by weaker export orders, leading to further shrinking of the labour force.

Global trade policies will significantly influence China’s economy over the medium to long term, given that approximately one-third of gross domestic product (GDP) growth traditionally comes from net exports. The White House said President Trump and President Xi will speak over the phone this week, with the outcome of these ongoing negotiations set to determine near-term market sentiment. Meanwhile, the Hang Seng is likely to trade in range between 22,500 and 24,000.

Hong Kong IPO market shows revival signs

Increased listings

The Hong Kong stock market has experienced a notable pickup in new listing activities throughout 2025. Improved liquidity and performance in Chinese equity markets have been key drivers of this renewed interest.

Strategic shifts

US-China tensions have also acted as a catalyst, with some Chinese companies choosing Hong Kong listings over overseas options to mitigate regulatory and delisting risks. This trend reflects broader strategic considerations about market access and regulatory stability.

Following blockbuster listings from Contemporary Amperex Technology Co. Limited (CATL) and Hengrui Pharma, funds raised through IPOs on the main board reached HK$72 billion through May – the highest for this period since 2021. This represents a significant recovery in market confidence. Companies like Will Semiconductor and fast-fashion retailer Shein are considering Hong Kong listings later this year, potentially offering further investment opportunities in ‘new economy’ sectors.

Outlook for Chinese markets

Chinese markets face a complex landscape of opportunities and challenges as 2025 progresses. While the early-year surge demonstrated the potential for significant gains driven by AI developments and policy support, recent sideways trading reflects growing uncertainty about trade relations and domestic economic conditions.

The upcoming phone call between President Trump and President Xi could provide crucial direction for market sentiment, potentially determining whether the current trading range breaks higher or lower. Investors should monitor both geopolitical developments and domestic policy responses, as Beijing’s ability to stimulate growth while managing trade tensions will be key to sustained market performance.

Despite near-term volatility, the revival in Hong Kong’s IPO market and continued investment in technology sectors suggest underlying strengths that could support longer-term growth once trade uncertainties are resolved.