Growth Dragons Weekly: Alibaba All-In on AI, Baidu Buys YY, CICC and CGS Merger
What happened in China this week:
Trump Slaps Additional 10% Tariff On China, Retaliation Pending
Hong Kong Budget 2025 Should Prioritize Property Market Recovery
Alibaba Follows DeepSeek to Go Open-Source and Invests $52 Billion to Rival Western Cloud Companies
Baidu Acquires Social Live-Streaming Platform YY
More Broker Mergers: China International Capital Corp (CICC) x China Galaxy Securities
EHang Expands Production of eVTOL Drones After Demand Increased 300%, Shares Gain 50% YTD
Pony.ai Received Exclusive License in Guangzhou, Stock up 14% YTD
#1 Trump Slaps Additional 10% Tariff On China, Retaliation Pending
Amid escalating global trade tensions, former U.S. President Donald Trump’s decision to double tariffs on Chinese imports—from 10% to 20%—has intensified pressure on Beijing. The additional tariff is set to take effect in March this year. Another potentially impactful measure could target automobiles, as many Chinese EV makers are now seeking to export their products globally. One way to overcome these tariffs is to shift manufacturing to the U.S., which aligns with Trump’s objective of repatriating production.
Given China’s economies of scale in production, it is likely that the country will still be able to produce goods at a lower cost and may continue to underprice its products even after the tariffs are imposed. The overall impact might be limited, especially if the claims of overcapacity are true. In such a scenario, China could afford slash prices to ensure its goods remain competitive. Also, these tariffs were anticipated, with buyers, sellers, and even the Chinese government having prepared for this eventuality.
We should also expect the Chinese government to retaliate with measures of its own against the U.S. While it is hard to predict the exact nature of these moves, it is likely that any response will be measured, aiming to avoid further escalation in the already tense relationship between the world’s two largest economies.
#2 Hong Kong Budget 2025 Should Prioritize Property Market Recovery
Hong Kong is facing a significant fiscal deficit—projected at HK$87.2 billion for the 2024-25 financial year—which has prompted the government to implement a mix of austerity measures and targeted investments designed to foster long-term stability and innovation.
Here are the key points from the budget:
Fiscal Reforms and Cost-Cutting:
The government is implementing a 7% reduction in recurrent expenditure and planning the elimination of 10,000 civil service positions to address the fiscal shortfall.
Investment in Innovation:
HK$1 billion has been allocated for an AI Research and Development Institute, and HK$3.7 billion is dedicated to the Hong Kong-Shenzhen Innovation and Technology Park.
Tourism and Cross-Border Collaboration:
The Hong Kong Tourism Board will receive HK$1.2 billion under the “Development Blueprint for Hong Kong’s Tourism Industry 2.0,” along with significant funds to promote cross-border technological collaboration.
Infrastructure and Housing Initiatives:
The budget supports infrastructure projects with HK$10 billion earmarked for an Innovation and Technology Industry-Oriented Fund. The Northern Metropolis project aims to develop 80,000 private housing units over the next five years, with significant bond issuances planned to finance these developments while keeping the debt-to-GDP ratio in check.
Real Estate Market Stimulus:
Adjustments include reduced transaction taxes for properties valued between HK$3-4 million and an increased cap for the lowest stamp duty eligibility, aiming to boost transaction volumes and support market recovery.
Overall, while the budget’s fiscal tightening is commendable for curbing excessive public expenditure, the emphasis on innovation raises questions given that Hong Kong’s traditional strengths lie in finance rather than technological development. A more focused effort on strengthening cross-border ties with Shenzhen—leveraging Shenzhen’s technological advancements—would likely yield better results.
Furthermore, given that real estate remains a crucial store of wealth in Hong Kong, reviving this sector is key to restoring market confidence. The objective is not to recreate the exuberance of past market bubbles, but rather to set the property market on a sustainable growth path—an essential step in making Hong Kong great again.