How has China been managing the trade war?
China has been managing the trade war better than expected, showing resilience in both the equity and yuan markets. This is partly due to the weak dollar and China’s tariff preparedness. China expected heavy tariffs and prepared accordingly, unlike other US trading partners who were caught by surprise.
Despite the dollar’s weakness, the trade war has still impacted the yuan, especially against the euro and yen.
Contrary to the US, China is now perceived as stable and predictable, with clear long-term plans. In this environment, it is time to make China less scary again,
Why have Chinese equity markets held up relatively well?
The Chinese equity market has been more resilient than the US market, even with the recent global market sell-off. This is due to supportive fiscal policies and the advent of DeepSeek, an open-source AI model that is a good, open-source alternative to top-end US offerings.
Chinese corporations are expected to use AI faster than Western corporations, focusing on direct applications of AI models. This will lead to faster value creation.
Most Nordic financial institutions have participated in the rotation of equity investments out of the US, preferring the European equity market. Yet very few have actively taken significant positions on Chinese equities thus far.
What about geopolitical stability in the Asia-Pacific region?
Aside from the uncertainty of US trade policy, Asia-Pacific is also grappling with uncertainty about US commitment in the region. This includes historical US military relations with Australia and New Zealand and some governments involved in the territorial disputes with China in the South China Sea – namely Brunei, Indonesia, Malaysia, the Philippines, Taipei and Vietnam.