# Market Update - China

_Chinese markets are stabilising post-tariffs. Stimulus is underway, trade talks are coming, and key companies in our strategies showed strong results._

Neil Woodford · 9 May 2025 · 2 min read

![Market Update - China](https://cdn.sanity.io/images/v3acfbvo/production/fb2b5b1a68f7819dec8b1985de681a7ff828b12c-5472x3648.jpg?w=1600&fit=max&auto=format)

---

Following the Liberation Day mayhem that President Trump unleashed on the world just over a month ago, things have gradually calmed down and a sort of “back to normal” mood has started to regain some currency. In the immediate aftermath of Trump’s original tariff announcement, the Chinese equity markets fell significantly in common with virtually all other financial markets. It has since recovered well but is still just over 4% below its late March peak. (CSI 300)

In part, this is a product of concerns that the extremely damaging tariffs levied on Chinese exports will remain in place and lead to significant damage to the domestic Chinese economy and especially to the manufacturing sectors geared into the lucrative US export market. These concerns are reflected in a number of high-profile downgrades to growth forecasts for the Chinese economy, notably from the IMF and a range of leading global investment banks.

Policy makers in China have sensibly responded to the tariff announcement by introducing a package of mainly monetary measures designed to stimulate the domestic economy and to provide targeted help to those businesses and industries directly affected by the trade war with the US. These measures include lower reserve requirements for commercial banks (to enable them to lend more), a significant injection of liquidity, lower policy and mortgage rates and a series of measures designed to help foreign listed companies return to China’s domestic stock markets. This is an important package of measures, but I am confident that further fiscal policy announcements will be targeted at the household sector to encourage less saving and more spending in the near future.

Before this important policy announcement, it was also revealed that the first serious trade talks will occur between the US and China in Switzerland over the weekend. I had expected this to happen, and albeit a little later than I had hoped, I believe it will eventually lead to a significant amelioration of the current proposed level of tariffs and trade restrictions on both sides.

Prior to the disruption caused by Trump’s Liberation Day announcement, I had a very positive view of the domestic Chinese equity markets and specifically of some of China’s leading technology and EV businesses, nearly all of which to me looked profoundly undervalued after years of underperformance. Despite the additional potential challenges now confronting the Chinese economy, which of course may ease through the next period of negotiation, I am confident that the appeal of some of these leading Chinese stocks remains undiminished. Indeed, in some cases where share prices have performed poorly, their appeal has, if anything, increased.

If the policy stimulus starts to yield the results the leadership hopes for, then this recent setback will quickly fade, and I expect the market to start performing again, just as it did in the earlier part of 2025.

Some of the individual businesses I follow have also announced results in recent weeks. For the most part, these figures and their accompanying statements only cover the first three months of the year before the early April tariff announcement, but in general, the numbers have been very encouraging. In particular, BYD, CATL, Geely, Meituan, and Wuxi AppTech have all announced good results, which, in general, beat expectations. All of these businesses carry good underlying momentum into the next reporting period.