Careers Contact us
Menu

The China Briefing

Tip-toeing towards negotiations

US-China trade, China's economic outlook, potential stimulus, and the focus on technology and innovation.

Please find below our latest thoughts on China: 

  • While there have been signs in recent days of the US and China tip-toeing towards the negotiating table, there remain few concrete indications of progress.
  • China appears to have concluded that it can sustain a war of economic attrition longer than the US and that it has tools – such as supply chain leverage in areas including rare earths – to inflict significant pain.
  • US policy has seemingly turned to trying to isolate China by concluding trade deals with other countries that limit China’s involvement in their economies. However, the reality is that around 70% of countries now trade more with China than with the US.1
Chart 1: Share of total trade with China and with the US (ranked by share of trade with China)
Chart 1: Share of total trade with China and with the US (ranked by share of trade with China)

Source: Allianz Global Investors, IMF DOTS as at 30 April 2025. Note: EU excludes intra-EU trade.

  • While it is quite possible, therefore, that the stalemate persists for some time, nevertheless there are powerful economic incentives for both sides to negotiate.
  • China’s economy faces a significant economic shock. And although China has significantly ramped up its selfsufficiency in recent years, key industries remain vulnerable. Electric vehicles, for example, still rely primarily on imported semiconductors.2
  • As such, while China is very unlikely to make the first diplomatic moves, it is very likely to be a willing partner if Trump can find a face-saving way to start discussions.
  • For China equity investors, a key issue remains the extent to which there are renewed efforts to stimulate domestic demand in the face of the looming economic slowdown.
  • In this respect, we are in a wait-and-see mode. The most recent Politburo meeting at the end of April reaffirmed that policymakers will dial up fiscal and monetary stimulus in coming months. But it provided relatively few clues as to what steps it might take.
  • Officials are, in our view, conserving their firepower for several reasons. Partly because a previously announced fiscal expansion is still in progress. Partly because the precise impact on exporters is hard to gauge, especially due to the potential for large-scale tariff avoidance. And partly because it’s unclear where negotiations with the US stand.
Chart 2: Share of global patents by country
Chart 2: Share of global patents by country

Source: World Intellectual Patent Organisation as of 31 December 2023

  • It is, in practice, much easier for the Trump administration to withdraw tariff threats than for Beijing to withdraw stimulus announcements.
  • Our view is that it is increasingly likely there will be decisive and forceful policy changes including the government stepping up support for asset prices, not just in equities but in the crucial housing market as well.
  • In the meantime, while there is much global coverage of geopolitics, within China there continues to be a heavy focus on technology.
  • ‘Auto Shanghai’, one of the world’s largest car shows, has just concluded. The total exhibition area was 360,000 square meters with participation from close to 1,000 companies.3
  • Historically, a showcase for car companies to introduce their latest models, the exhibition has evolved into a much broader tech-oriented event. This year, for example, a number of brands focused on expansion into ‘low altitude industries’ including futuristic flying cars.
  • Another widely followed recent event was the first humanoid robot half marathon. Taking place in Beijing last month, it featured humans and robots running together for the first time (Bing Videos).
  • While the winning robot took just 2 hours 40 mins to finish, only 6 of the 21 robots completed the course,4 showing the technology has some way to go. Nonetheless, the fact this took place within China is another pointer towards the intense research efforts ongoing in tech-oriented industries.
  • This is reinforced by global patent figures where China’s share has steadily increased over the last 15 years.5 Of course, not all patents have value or can be commercialised. But the number of patents granted still gives a good sense of overall commitment to innovation and the pursuit of technological leadership.
  • The technology focus also partly explains the strong buying of the Hong Kong market from mainland China investors.
  • Year to date there have been around USD 78 billion of net flows through the ‘Southbound’ Stock Connect. That is already around 75% of the full year 2024 figures, with buying of AI tech names not available in the Shanghai and Shenzhen markets a key focus.6

1 Source: Gavekal as at 25 April 2025
2 Source: Gavekal as at 23 April 2025
3 Source: Global Times as at 2 May 2025
4 Source: BBC as at 19 April 2025
5 Source: World Intellectual Patent Organisation as at 31 December 2024
6 Source: Goldman Sachs as at 28 April 2025

  • Disclaimer
    Investing involves risk. The value of an investment and the income from it will fluctuate and investors may not get back the principal invested. Past performance is not indicative of future performance. This is a marketing communication. It is for informational purposes only. This document does not constitute investment advice or a recommendation to buy, sell or hold any security and shall not be deemed an offer to sell or a solicitation of an offer to buy any security.

    The views and opinions expressed herein, which are subject to change without notice, are those of the issuer or its affiliated companies at the time of publication. Certain data used are derived from various sources believed to be reliable, but the accuracy or completeness of the data is not guaranteed and no liability is assumed for any direct or consequential losses arising from their use. The duplication, publication, extraction or transmission of the contents, irrespective of the form, is not permitted.

    This material has not been reviewed by any regulatory authorities. In mainland China, it is for Qualified Domestic Institutional Investors scheme pursuant to applicable rules and regulations and is for information purpose only. This document does not constitute a public offer by virtue of Act Number 26.831 of the Argentine Republic and General Resolution No. 622/2013 of the NSC. This communication's sole purpose is to inform and does not under any circumstance constitute promotion or publicity of Allianz Global Investors products and/or services in Colombia or to Colombian residents pursuant to part 4 of Decree 2555 of 2010. This communication does not in any way aim to directly or indirectly initiate the purchase of a product or the provision of a service offered by Allianz Global Investors. Via reception of this document, each resident in Colombia acknowledges and accepts to have contacted Allianz Global Investors via their own initiative and that the communication under no circumstances does not arise from any promotional or marketing activities carried out by Allianz Global Investors. Colombian residents accept that accessing any type of social network page of Allianz Global Investors is done under their own responsibility and initiative and are aware that they may access specific information on the products and services of Allianz Global Investors. This communication is strictly private and confidential and may not be reproduced, except for the case of explicit permission by Allianz Global Investors. This communication does not constitute a public offer of securities in Colombia pursuant to the public offer regulation set forth in Decree 2555 of 2010. This communication and the information provided herein should not be considered a solicitation or an offer by Allianz Global Investors or its affiliates to provide any financial products in Brazil, Panama, Peru, and Uruguay. In Australia, this material is presented by Allianz Global Investors Asia Pacific Limited (“AllianzGI AP”) and is intended for the use of investment consultants and other institutional /professional investors only, and is not directed to the public or individual retail investors. AllianzGI AP is not licensed to provide financial services to retail clients in Australia. AllianzGI AP is exempt from the requirement to hold an Australian Foreign Financial Service License under the Corporations Act 2001 (Cth) pursuant to ASIC Class Order (CO 03/1103) with respect to the provision of financial services to wholesale clients only. AllianzGI AP is licensed and regulated by Hong Kong Securities and Futures Commission under Hong Kong laws, which differ from Australian laws.

    This document is being distributed by the following Allianz Global Investors companies: Allianz Global Investors GmbH, an investment company in Germany, authorized by the German Bundesanstalt für Finanzdienstleistungsaufsicht (BaFin); Allianz Global Investors (Schweiz) AG; Allianz Global Investors UK Limited, authorized and regulated by the Financial Conduct Authority; in HK, by Allianz Global Investors Asia Pacific Ltd., licensed by the Hong Kong Securities and Futures Commission; in Singapore, by Allianz Global Investors Singapore Ltd., regulated by the Monetary Authority of Singapore [Company Registration No. 199907169Z]; in Japan, by Allianz Global Investors Japan Co., Ltd., registered in Japan as a Financial Instruments Business Operator [Registered No. The Director of Kanto Local Finance Bureau (Financial Instruments Business Operator), No. 424], Member of Japan Investment Advisers Association, the Investment Trust Association, Japan and Type II Financial Instruments Firms Association; in Taiwan, by Allianz Global Investors Taiwan Ltd., licensed by Financial Supervisory Commission in Taiwan; and in Indonesia, by PT. Allianz Global Investors Asset Management Indonesia licensed by Indonesia Financial Services Authority (OJK).

    AdMaster: 3420012

Allianz Global Investors

You are leaving this website and being re-directed to the below website. This does not imply any approval or endorsement of the information by Allianz Global Investors Asia Pacific Limited contained in the redirected website nor does Allianz Global Investors Asia Pacific Limited accept any responsibility or liability in connection with this hyperlink and the information contained herein. Please keep in mind that the redirected website may contain funds and strategies not authorized for offering to the public in your jurisdiction. Besides, please also take note on the redirected website’s terms and conditions, privacy and security policies, or other legal information. By clicking “Continue”, you confirm you acknowledge the details mentioned above and would like to continue accessing the redirected website. Please click “Stay here” if you have any concerns.