what it means for China markets
A man looks at a screen showing Chinese stock market movements while using his mobile phone in Beijing on April 7, 2025.
Wang Zhao | Afp | Getty Images
Chinese stocks could be on a new high following this week’s high-stakes meeting between US President Donald Trump and Chinese President Xi Jinping; Investors say the summit could ease trade tensions and revive momentum, especially in the country’s lagging technology stocks.
Goldman Sachs analysts said the talks are expected to focus narrowly on trade and export controls, including tariffs, semiconductor restrictions and rare earth exports. The bank said it expects China to agree to buy more U.S. agricultural products, energy and aircraft in exchange for avoiding further tariff increases.
While Goldman doesn’t expect a comprehensive “grand bargain,” he said the meeting could still “serve as a tactical catalyst for the strengthening of the Chinese yuan and Chinese stocks.”
Dong Chen, chief investment officer at Bank J Safra Sarasin, saw the peak as a short-term catalyst for Chinese stocks after months of underperformance, especially compared to U.S. tech rivals riding the AI boom.
Although markets do not appear to have “overly high expectations” for the meeting, Chen said investors are quite optimistic. He added that the fact that Trump and Xi are already meeting sends a “positive signal.”
Even the possibility of a limited thaw in relations is particularly important for Chinese technology firms, which remain constrained by US chip export restrictions. This also comes as global investors continue to turn to AI-related trades, particularly in South Korea and Taiwan.
Access to Nvidia’s latest chips is very, very critical for Chinese players to compete on the global stage.
Barclays China internet analyst Jiong Shao emphasized that “the most important area of competition today, especially between the USA and China, is artificial intelligence, and the biggest bottleneck in artificial intelligence today is computing.”
“The secret weapon, or not-so-secret weapon, of US AI players is access to Nvidia chips that Chinese companies do not have,” he said.
This, he explained, makes Nvidia CEO Jensen Huang’s presence in Beijing with Trump particularly notable for investors tracking the AI race.
“Access to Nvidia’s latest chips is very, very critical for Chinese players to compete on the global stage,” Shao said.
Immediately after Trump’s meeting with Xi, Reuters reported that Washington had approved the sale of Nvidia’s H200 AI chips to several major Chinese tech firms, citing three people familiar with the matter. About 10 Chinese companies include: Alibaba’s, TencentByteDance and JD.com A potential breakthrough for China’s AI industry.
Investors are also increasingly warming to China’s AI ecosystem following recent earnings from the following companies. Alibaba’s And Tencent Recommended cloud and AI-related demand is accelerating.
Shao said investors initially questioned whether global tech companies’ massive AI spending would yield returns. The view has changed after leading US hyperscalers posted stronger growth.
“Now investors are starting to see a return on their investment,” he said, adding that China’s internet giants may be “a few quarters behind the United States in terms of investment spending.”
Investors are being cautious
Some of the rally has begun to show itself in the markets. The Hang Seng Technology Index rose about 0.5% on Thursday. Hang Seng Index rose roughly 0.3%.
Year-to-date, the Hang Seng Index is up more than 3%, while the Hang Seng Tech Index is down more than 7%. The mainland CSI 300 is up about 7% over the same period.
Still, these relatively modest moves pale in comparison to the sharp rises seen in some other markets in the region, including Japan, South Korea and Taiwan.
China’s ChiNext index is often described as the country’s answer to the question: NasdaqIt fell nearly 2% on Thursday. However, the index, which tracks mainland-listed companies (also known as A shares) with high exposure to the semiconductor, healthcare and new energy sectors, remains near record highs.
“We believe some traders are in a wait-and-see mode, taking profits and hedging their positions in case the US-China summit fails to meet expectations,” BTSE Group COO Jeff Mei said.
“However, it is highly likely that we will see a post-summit turnaround and recovery as Trump is likely to make concessions in exchange for assistance in other areas.”
Still, not everyone believes China’s stock rally will expand meaningfully without broader, stronger earnings growth.
“The problem with the Chinese stock market, when you look at MSCI China for example, the problem is still earnings, right?” Chen said. “Earnings per share actually still haven’t improved meaningfully.”
Chen also noted a growing divergence between Chinese tech listed on the mainland and internet firms listed in Hong Kong.
“A lot of those leveraging AI, especially on the hardware front, are listed in A shares, and you’re actually seeing very excellent performance in China,” he said. In contrast, many constituents of Hong Kong’s Hang Seng Technology Index are internet and e-commerce companies that are not direct AI beneficiaries.
This view reflects Goldman Sachs’ preference for mainland Class A shares over Hong Kong shares.
For now, investors appear less focused on the prospect of a comprehensive reset in geopolitics and more focused on the prospect of both sides stabilizing relations.
“At least this trade ceasefire needs to be extended somewhat,” Chen said.
