Geneva, London, Stockholm: these three European cities were the scene of highly charged political negotiations in 2025, when they hosted delegations from the USA and China. Following initial talks in western Switzerland in May, representatives of the two superpowers came together in the British metropolis in June, where they agreed on a framework for future trade relations, particularly with regard to the issue of rare earths. The end of July saw a further two-day meeting in the Swedish capital. Although no breakthrough came, US president Donald Trump suspended the tariffs he had since introduced by another 90 days until 00:01 Washington time on 10 November.
While more than half of the time until this deadline has now passed, investors seem to have shaken off any concerns about an escalation in the trade dispute. That also and especially applies for the stock exchanges in the Far East. The Hang Seng Index, which tracks Chinese stocks listed in Hong Kong, is now trading at its highest level in almost four years. The benchmark has gained a third in value in the first three quarters of 2025, putting the Hang Seng in first place in the global ranking of key stock markets (see graph). Although the stocks traded on the Chinese mainland have not been able to keep pace, the 17% rise in the CSI-300 still puts it on a par with the US technology barometer, the Nasdaq-100.
The rally in the Far East is based on drivers that are also triggering a great deal of optimism on Wall Street and elsewhere. The Chinese equity market is benefiting from the boom in artificial intelligence (AI) and the resulting general run on technology stocks, particularly those in the semiconductor segment. DeepSeek turned out to have been the initial spark. Presented at the start of the year, the Chinese AI application is said to be particularly efficient and inexpensive. Added to this is the fact that Beijing wants to boost the domestic production of semiconductors. The government is, at the same time, causing something of a stir with its plan for “anti-involution”, which aims to curb the sometime ruinous competition in sectors such as mining, photovoltaics and food delivery. Huge overcapacities and fierce price competition have been eroding profitability for years, leading to a shrinkage (involution) in this and other sectors of the economy.
Politics is likely to remain a determining factor in China’s equity market over the coming weeks and months as well. It is not just that the deadline in the trade dispute with the USA is drawing closer – work on the 15th five-year plan is also underway. The content – following a fourth plenum – is to be presented in October. The People’s Congress next March will be responsible for adopting the five-year plan, which covers the period 2026 to 2030. The analysts of J.P. Morgan point out that Beijing has set itself the long-term goal of doubling gross domestic product (GDP) and disposable household income by 2035 compared to 2020 levels. From this, the analysts reckon growth rates will average between 4% and 5% for the next five years. This would mean that the largest emerging market would maintain its current pace (see graph).
To achieve this, Beijing is likely to focus on technological innovation in order to strengthen the resilience of industrial production chains. J.P. Morgan also anticipates an expansion of capacity in the field of AI, new infrastructure and research. On the demand side, the government will probably try to boost domestic consumption, particularly in view of the imponderables in global trade. J.P. Morgan remains generally positive when looking at China’s equity market. Alongside the “anti-involution” and the upcoming five-year plan, the analysts argue that private investors could also increase their exposure. At the moment, only around 5% of private household capital in China is invested in shares. Property is the dominant investment at 60%, with another quarter of assets being held in cash or in bank accounts.
As at 29 September 2025; source: ReutersPast performance is not a reliable indicator of future performance.
e=expected; as at September 2025; source: J.P. MorganPast performance is not a reliable indicator of future performance.