China Musings_ Self-help is underway, but tariff drags are likely on the way

Group 1: Market Performance - MSCI China has nearly recovered its 13% drawdown since Liberation Day, returning 12% year-to-date[1] - The Rmb appreciated against the USD by 1.7% in the past month, indicating currency strength amid trade tensions[1] - Chinese government bonds are re-testing all-time highs, reflecting resilience in financial assets despite trade frictions[1] Group 2: Economic Forecasts - The effective US tariff rate on Chinese imports is expected to decrease from approximately 160% to around 60% soon, positively impacting earnings forecasts[1] - The 12-month index target for MSCI China and CSI300 has been raised to 78 and 4,400, suggesting potential returns of 7% and 15% respectively[1] - EPS growth estimates for MSCI China have been adjusted from 4% to 6% based on lower tariff expectations and a stronger Rmb[9] Group 3: Policy Measures - The PBoC and other regulatory bodies announced 23 measures to support the economy, including targeted monetary easing to improve liquidity[5] - Recent monetary policy actions include a 50 basis point RRR cut, providing approximately Rmb1 trillion in liquidity[7] - The focus of policy measures is increasingly on demand-side support, aiming to stabilize the housing market and enhance social safety nets[5] Group 4: Trade and Investment Dynamics - Southbound equity flows to HK-listed stocks have reached US$80 billion year-to-date, three times larger than the same period last year[18] - Concerns regarding ADR de-listing risks have moderated, but potential liquidity disruptions could arise if US investors liquidate over US$800 billion in Chinese stocks[14] - The Chinese National Team has actively supported the A-share market, purchasing at least Rmb110 billion worth of equities since April[18]