China’s government wants to get the country’s stagnating economy back on track and is preparing for a trade dispute with the US. At the National People’s Congress in Beijing last week, Premier Li Qiang reaffirmed the leadership’s determination to support the economy with further measures and announced a growth target of 5 per cent. Li addressed the almost 3,000 delegates in the Great Hall of the People, mentioning an increasingly tough environment and changes the world has not seen in a century.
Growth target of 5 percent
The 5 per cent economic growth target is in line with expectations, but is still considered ambitious. Dampened consumer sentiment and high youth unemployment have long been reflected in weak domestic demand. In addition, China’s economy continues to suffer from the country’s property crisis. Past performance is not a reliable indicator for the future.
Data as of March 2025
This is further exacerbated by the trade dispute with the US. The export of goods to the US remains an important pillar of the Chinese economy, and the conflict could hit the country hard. US President Donald Trump doubled the tariffs on Chinese goods imported into the US from 10 to 20 per cent immediately following his assumption of office. China has already responded with retaliatory tariffs of 10 to 15 per cent on a range of agricultural products from the US and punitive measures against some US companies. The world’s two largest economies are therefore on the cusp of a trade war similar to the one from Trump’s first term in office, when both sides continued to escalate through tariffs and counter-tariffs.
In order to revitalise the economy despite the trade dispute, China is now relying on massive investments, planning to issue billions in bonds for this purpose. The government has already increased its budget deficit plan by one percentage point to 4 per cent of the GDP – the highest level in decades. To this end, it plans to issue long-term special bonds to the tune of CNY 1.3tn (around EUR 170bn). In addition, state banks are to be provided with capital in the form of further special bonds totalling CNY 500bn.
Central Bank plans to promote key industries and announces possible interest rate cut
China’s central bank has also recently announced further measures to support the economy. According to Pan Gongsheng, governor of the People’s Bank of China, the central bank wants to cut interest rates “at the appropriate time” and inject liquidity into the financial system. However, this could fuel the trade dispute further, as a rate cut would also weaken the yuan. Trump also previously warned China against measures to weaken the national currency, as this would make Chinese products cheaper in the US.
Pan also announced new monetary policy instruments to stabilise consumption and foreign trade and promote investment in technological innovations. Among other things, a credit line for the technology sector will be doubled from CNY 500bn to CNY 1tn (nearly EUR 130bn). According to the Chairman of the National Development and Reform Commission, Zheng Shanjie, the country is planning major projects in key sectors such as the railway sector, nuclear energy and water management in order to attract private investments.
China leading in renewable energy and EVs
Meanwhile, the “Made in China 2025” government plan launched ten years ago is showing results. The country has become the global market leader in renewable energy and produces by far the most electric vehicles in the world. Chinese electric car manufacturer BYD is in the process of overtaking the previous market leader, US company Tesla. In Q2 of last year, BYD reported a higher turnover than Tesla for the first time. Chinese car manufacturer SAIC and Chinese tech giant Huawei also want to join forces in the development of electric cars, the two companies announced in February. The companies listed here have been selected as examples and do not constitute an investment recommendation.
Breakthroughs in artificial intelligence
The field of artificial intelligence (AI) has also seen some Chinese breakthroughs. Most recently, the Chinese company DeepSeek made a big splash around the world, demonstrating with its language model that China’s companies can keep up with the USA when it comes to AI. DeepSeek’s success has also improved sentiment on the Chinese stock markets since the beginning of the year. Tech stocks, which lost a lot of value over the years, were able to recover some of their losses and even reached new highs at times. The People’s Congress recently promised tech companies further aid.
Li addressed the issue specifically as well. According to the work report presented by the premier, the government is planning to support the “extensive application of large-scale AI models” and also intends to implement a mechanism to increase funding for “the industries of the future”. The government also wants to reduce the People’s Republic’s dependence on Western chip technologies with a new programme. To this end, a nationwide guideline will encourage companies to make greater use of processors based on the licence-free and open technology RISC-V, Reuters reported citing a number of insiders.
Surprisingly positive percent economic barometer and company figures
Positive signals recently came from a number of economic indicators. The Purchasing Managers’ Index for service providers compiled by the business magazine Caixin rose by 0.4 points to 51.4 points in February month-over-month. This improvement in sentiment came as a surprise to analysts, who on average had expected and decline to 50.7 points. The index for the manufacturing industry rose to 50.8 points in February, up from 50.1 points in January. The official Purchasing Managers’ Index climbed to a three-month high of 50.2 points in February, rising back above the 50-point mark that signals growth.
The quarterly results of some major Chinese companies also recently surprised with positive figures. Computer manufacturer Lenovo, for example, roughly doubled its quarterly profit to almost USD 700m. Internet giant Alibaba even more than tripled its quarterly profit. The group operates China’s largest e-commerce platform Taobao, therefore its business development is considered an important indicator of consumer sentiment in the People’s Republic.
Invest in the comeback of the Chinese economy with funds
Despite geopolitical uncertainties and the trade conflict with the US, the chances are good that the Chinese economy will recover in the coming months. Funds allow risk-conscious investors to participate in a resurgence of the Chinese economy. ERSTE STOCK EM GLOBAL invests broadly in companies headquartered or operating in global emerging markets. Chinese companies currently account for 35 percent of the fund’s holdings. Shares of other major Asian emerging markets such as Taiwan, India, and South Korea are also prominently represented. The top ten individual positions include chip manufacturer Taiwan Semiconductor and technology heavyweights Tencent and Alibaba.
Please note that investing in securities also involves risks besides the opportunities described. Past performance is not a reliable indicator for the future performance of a fund.
The performance is calculated in accordance with the OeKB method. The management fee as well as any performance-related remuneration is already included. The issue premium which might be applicable on purchase and as well as any individual transaction specific costs or ongoing costs that reduce earnings (e.g. account- and deposit fees) have not been taken into account in this presentation.
Notes for ERSTE STOCK EM GLOBAL
The fund employs an active investment policy. The assets are selected on a discretionary basis. The fund is oriented towards a benchmark (for licensing reasons, the specific naming of the index used is made in the prospectus (12.) or KID “Ziele”). The composition and performance of the fund can deviate substantially or entirely in a positive or negative direction from that of the benchmark over the short term or long term. The discretionary power of the Management Company is not limited.
Advantages:
- Broadly diversified investment in companies in emerging markets with little capital investment.
- Active stock selection based on fundamental criteria.
- Participation in global emerging market growth opportunities.
- Opportunities for capital appreciation.
- The fund is suitable as an addition to an existing equity portfolio and is intended for long-term capital appreciation.
Risks:
- The price of the funds can fluctuate considerably (high volatility).
- An investment in emerging markets has a higher risk potential than an investment in developed markets.
- Due to the investment in foreign currencies, the net asset value in Euro can fluctuate due to changes in the exchange rate.
- Capital loss is possible.
- Risks that may be significant for the fund are in particular: credit and counterparty risk, liquidity risk, custody risk, derivative risk and operational risk. Comprehensive information on the risks of the fund can be found in the prospectus or the information for investors pursuant to § 21 AIFMG, section II, “Risk information”.
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