December 11, 2025 09:00 PM GMT China Equity Strategy | Asia Pacific A-Share Sentiment Up on Higher Turnover Market sentiment has increased on higher turnover. We maintain a cautiously constructive stance and remain confident on further inflows. A more forceful fiscal pivot and improved US-China relations would turn us more bullish. A-share investor sentiment increased vs. previous cycle: Weighted MSASI increased by 6ppt, to 47% vs. the prior cutoff date (December 3), while weighted MSASI 1MMA decreased by 2 ...

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Geopolitical Strategy - Southeast Asia trade deals could help Washington counter Beijing [1] - These deals may set the stage for a meeting between Trump and Xi Jinping [1]

US-Australia Economic & Military Alliance - US and Australia announce a $3 billion joint venture project to develop critical minerals, potentially yielding $50 billion in these minerals [2] - The US-Australia military alliance, dating back to World War I, could continue to benefit both countries through sales of American planes and military technology [4] - From Australia's perspective, this alliance partly aims to contain China in their neighborhood [4] US-China Trade Relations - Despite trade tensions, the US President believes good trade deals can be made with China, including the purchase of American soybeans [3] - The President suggests that current economic pressure between the world's two largest economies will ultimately "work out fine" [3] Middle East Ceasefire - The US President indicates that if the ceasefire between Hamas and Israel doesn't hold, Israel, with US support, would forcibly disarm Hamas [4] - The White House believes it has done the "heavy lifting" to establish the ceasefire and expects other regional partners, particularly Gulf Arab countries, to ensure it holds [6] - The White House has declared victory in the Middle East and needs that victory to hold [7]

Geopolitical Analysis - China appears to be in a stronger position, but the US also possesses significant advantages [1]

Market Volatility & Geopolitical Risk - Market volatility and uncertainty are inherent costs of engaging with totalitarian states like China [2] - Expect continued market posturing and negotiation cycles, particularly around extension deadlines [3] - Long-term market stability hinges on US dominance in next-generation industries, diminishing China's influence [5] US Competitive Strategy - US needs to prioritize speed as a weapon to compete with China's top-down efficiency [12] - Private sector innovation and manufacturing are crucial for achieving American dominance [8][9] - Regaining control over materials and supply chains is essential for US competitiveness [9] Investment & Capital Allocation - Significant capital investment, such as JPMorgan's potential $500 billion to $1.5 trillion allocation, can accelerate growth in key national security industries [9][10] - Capital infusion enables companies to move faster in building, rebuilding, and dominating critical sectors [11][12] Rare Earths & Strategic Independence - China is currently exerting leverage through rare earth elements [6] - The US is recognizing the need for greater independence in rare earth materials [6]

Summary of Key Points from the Conference Call Industry Overview - The discussions primarily focused on the Chinese economy and its various dynamics, including growth rates, export performance, and geopolitical factors affecting trade and investment. Key Topics and Insights 1. Slowing Growth and Policy Stimulus - Major activity indicators such as industrial production, retail sales, and fixed asset investment showed notable year-over-year growth deceleration in July and August [4][5] - Investors are increasingly concerned about the potential for additional policy easing due to signs of economic weakening, although policymakers appear relatively unconcerned as growth remains above 5% year-over-year [4][5] 2. Chinese Export Slowdown - There is a divergence in investor opinions regarding the outlook for Chinese exports, with some believing a slowdown is delayed while others expect it to persist despite increased US tariffs [6] - The forecast for China's current account surplus is around 3.5% of GDP for 2025 and 2026, which is significantly higher than consensus expectations [6] 3. Anti-involution and Deflation - The concept of "anti-involution" is seen as a medium-term strategy to combat deflation and improve corporate profitability, though its effects may take time to materialize [7][9] - The government aims to address issues such as overcapacity and excessive price competition, which hinder innovation and high-quality growth [9] 4. Disconnect Between Real Economy and Equity Market - There is a notable disconnect between weak domestic demand and strong equity market performance, raising questions about the sustainability of this trend [10] - Despite concerns, many investors remain positive on Chinese equities, viewing them favorably compared to other investment options [10][11] 5. Focus on Consumption in the 15th Five Year Plan - Investors are concerned about China's reliance on exports and the low share of household consumption in GDP, fearing potential economic challenges similar to those faced by Japan in the 1990s [12][14] - There is cautious optimism regarding a policy shift towards boosting consumption, although the government is still focused on technological innovation and high-tech manufacturing [15] 6. US-China Relations and Geopolitics - Discussions highlighted the importance of US-China relations, with clients expressing interest in potential trade agreements and geopolitical risks, particularly concerning Taiwan [16] - The sentiment among investors is shifting towards a multipolar world, with expectations of a weaker Dollar and stronger RMB in the long term [16] Additional Important Insights - The implementation of previously announced policies, such as the RMB 500 billion financing instrument for infrastructure projects, is expected, but new easing measures are unlikely in the short term [5] - The potential for significant capital flows from households into the equity market could drive market performance higher in the coming quarters [11] This summary encapsulates the critical discussions and insights from the conference call, providing a comprehensive overview of the current state and outlook of the Chinese economy and its investment landscape.

US-China Trade Negotiations & TikTok Deal - US and China are engaged in ongoing negotiations, with a framework reached for TikTok, pending leader approval [1][2][3] - The TikTok deal involves a shift to US-controlled ownership [3][16] - A potential meeting between President Xi and President Trump is being considered, with the TikTok deal seen as a precursor [2][5] - China will announce their perspective on the framework at 11:00 a.m Eastern Time [8][9] - The deadline for the TikTok deal may require a temporary extension [10] Trade Frictions Beyond TikTok - New accusations against Nvidia for violating anti-monopoly laws in China have emerged [6] - China has initiated two new probes into US semiconductors [7] - The US added two dozen Chinese companies to a blacklist and is urging allies to impose tariffs on China over Russian oil purchases [7] - US concessions, such as increased sales of Nvidia chips, may be necessary for China to agree to a broader deal [14] Investment & Immigration - The White House addressed concerns about disincentivizing investment by outside manufacturers, potentially in response to South Korean concerns [18] - There is discussion about embedding special visas in trade deals to facilitate the transfer of expertise and knowledge for factories being built in the US [19][20] - The current immigration system may not accommodate the necessary number of workers for these projects [20]

Business Expansion - The Panama Canal plans to enter the ports business through a tender for two terminals [1] Geopolitical Context - This move follows a high-profile clash between the US and China over the waterway [1]

AI and Productivity - Generative AI's impact on productivity is still uncertain, awaiting its "electricity moment" [1] - Businesses need to reorganize to realize AI's potential gains in earnings [1] - The discussion challenges the notion of an "AI jobs apocalypse" [1] Economic and Geopolitical Trends - The report covers immigration crackdowns, tariff uncertainty, and wage-inequality myths [1] - China's military buildup is reshaping economic strategy [1] - The podcast provides a dive into AI, economics, and geopolitics [1]