Right now, most of the world's attention is focused on the United States, and understandably so. From Trump's trade wars to attempts to replace Jerome Powell's refusal to lower interest rates, geopolitical tensions, and with a new earnings season just kicking off and affecting the S&P 500, there is no shortage of headlines.
However, the world is not just about the United States. Interesting developments are also taking place elsewhere, especially in China. And no, we're not just talking about toy maker Pop Mart, which expects its revenue to rise by at least 200% and its net profit by 350% year-on-year in the first half of the year.
The real story is that the Chinese economy continues to hold up. According to data released Tuesday, the country's GDP grew 5.2% year-on-year in the second quarter, a slight slowdown from 5.4% in the first quarter, but still above expectations of 5.1%. In short, there is no fall off the cliff because of trade wars.
What keeps things afloat?
Mainly exports. Amid trade tensions, U.S. importers had been stockpiling Chinese goods, but that boost is quickly fading. As exports to the U.S. and EU decline, overall export activity will likely weaken in the second half of the year. This could further slow China's GDP growth, making it even harder to hit the 5% full-year target.
To offset the possible drop in exports, China will need to boost domestic consumption, which remains weak. The consumer savings rate remains high. Option B would be to increase economic stimulus, something investors have been waiting for months and which has not yet arrived.
So, what could we expect from the Chinese market?
The CSI 300 continental benchmark index reflects investors' concerns about growing geopolitical risks, not only with the United States, but also with Europe, which recently accused China of having “the largest trade surplus in human history.” No wonder Xi Jinping decided not to attend the upcoming EU-China summit.
At the same time, concerns about deflation persist in China. In June, consumer inflation was just +0.1% year-on-year, while producer prices fell by 3.6%. These figures, combined with persistently weak consumer confidence and the continued decline in house prices, put additional pressure on sentiment.
Meanwhile, Hong Kong's stock market is performing relatively well. Investors are showing renewed enthusiasm for technology companies such as Alibaba and Tencent, which are listed in Hong Kong and are not subject to the same domestic pressures. DeepSeek's launch further boosted its recent gains.
