Growth Dragons Weekly: China and Hong Kong Stocks Rally On China’s 5% GDP Target For 2025
What happened in China this week:
China and Hong Kong Stocks Rally On China’s 5% GDP Target For 2025
China Retaliates Against U.S. Trade Tariffs
CK Hutchison Sells Panama Canal Ports to BlackRock Amid U.S. Pressure, China Adds New Routes
BYD’s US$5 Billion Fundraising Marks Largest Post-IPO Capital Raise
JD.com Reports 13% YoY Revenue Growth in 4Q and Announces $5B Share Buyback Equivalent To 8% of Its Market Cap
Full Truck Alliance Revenue Surges 32% in Q4, Net Income Crosses RMB 1 Billion After 44% Jump
Dingdong Revenue Rises 18% YoY in Q4, While Profits Soar 618%
#1 China and Hong Kong Stocks Rally On China’s 5% GDP Target For 2025
China has set an ambitious GDP growth target of around 5% for 2025. Some might argue that this is the same growth rate as in 2024, so why call it ambitious? The answer lies in the shifting economic landscape—global growth is slowing, and U.S. trade restrictions on China are intensifying. Achieving this target in such an environment requires significant policy support.
To sustain growth, the Chinese government plans to issue 1.3 trillion yuan (approximately US$182 billion) in ultra-long special treasury bonds—an increase of 300 billion yuan from the previous year. This move, outlined in a government work report submitted to the top legislature on Wednesday, signals Beijing’s commitment to fiscal stimulus as a key driver of economic momentum.
In addition, China has raised its deficit-to-GDP ratio to around 4%, a full percentage point higher than last year. This expansionary fiscal policy highlights the government’s willingness to prioritize economic growth over short-term budgetary concerns.
Premier Li Qiang reaffirmed China’s dedication to its long-standing policy of economic opening, emphasizing that reforms and development opportunities will remain central to its strategy. Key priorities include advancing technological innovation, particularly in artificial intelligence (AI), smart terminals, and the Internet of Things (IoT). China also plans to accelerate the large-scale deployment of 5G technology, further cementing its position in the global tech landscape.
Despite these efforts, China continues to grapple with significant domestic economic challenges. Consumer spending remains sluggish, and job creation and income growth are under pressure. In response, the government has pledged to implement measures aimed at boosting household demand. A key component of this strategy is employment creation, with a goal of adding over 12 million new urban jobs to stabilize the labor market. Special attention will be given to vulnerable groups, including fresh graduates, migrant workers, and low-income individuals. Additionally, the government has committed to stabilizing the real estate and stock markets, recognizing their critical role in maintaining economic confidence.
The announcement of these economic policies sparked a strong rally in both Hong Kong and Chinese stock markets, reflecting a shift in investor sentiment. Market participants increasingly believe that Beijing is committed to sustaining growth through aggressive fiscal and monetary support. Following the substantial stimulus measures introduced in 2024, global investors are now pricing in the likelihood of even larger stimulus efforts and greater fiscal flexibility in 2025 to meet the 5% growth target.
The Chinese market has continued to rise sharply this week, particularly the Hang Seng Tech Index. Stocks such as Alibaba, Tencent, Kuaishou, and Trip.com have posted strong gains, underscoring renewed investor confidence in China’s economic outlook.
Global investors are showing increasing interest in Chinese equities. Bridgewater Associates, founded by Ray Dalio, saw its onshore China assets under management (AUM) increase by about 40% over the past year, largely due to China’s relative stability in a challenging global market. We believe fund managers will face mounting pressure from their limited partners to increase allocations to Chinese equities, especially as China continues to outperform most major markets.
As sentiment shifts and capital flows increase, China’s policy direction for 2025 will be closely watched by global investors looking for opportunities in a recovering market.
#2 China Retaliates Against U.S. Trade Tariffs
On Tuesday, President Donald Trump escalated tensions with America’s three largest trading partners, triggering swift retaliation from Mexico, Canada, and China. The U.S. imposed 25% tariffs on imports from Mexico and Canada, with a lower 10% levy applied to Canadian energy products. Meanwhile, tariffs on Chinese goods, initially set at 10%, were doubled to 20%.
In response, Beijing struck back with tariffs of up to 15% on a wide range of U.S. agricultural exports, including chicken, corn, cotton, and wheat, effective March 10. Additional 10% levies were imposed on U.S. aquatic products, beef, dairy, fruits, vegetables, pork, soybeans, and sorghum. China also expanded its countermeasures to energy and industrial sectors, introducing a 15% tariff on U.S. coal and liquefied natural gas (LNG), along with a 10% duty on crude oil. The automotive sector was not spared, with new 10% tariffs placed on U.S. agricultural machinery, pickup trucks, and large cars.
Beyond tariffs, China tightened restrictions on American businesses by adding 15 U.S. firms to its Export Control List, barring Chinese companies from supplying them with dual-use technologies. Additionally, 10 American companies were placed on its Unreliable Entity List, further restricting business ties. One major casualty was U.S. medical equipment manufacturer Illumina, which faced an export ban on its genetic sequencers to China. This move escalated biotech tensions, as two Chinese competitors, MGI and BGI, were already facing U.S. restrictions on national security grounds.
The intensifying trade war fueled strong rhetoric from both sides. China’s embassy in the U.S. issued a defiant statement on X (formerly Twitter), declaring, “If war is what the U.S. wants—be it a tariff war, a trade war, or any other type of war—we’re ready to fight till the end.” Meanwhile, economic experts sounded alarms over the broader impact of Trump’s policies. Douglas Irwin, a Dartmouth College economist specializing in U.S. tariff history, estimated that these measures would raise America’s average tariff rate from 2.4% to 10.5%—the highest level since the 1940s. Industry leaders also warned of severe consequences, with Greg Ahearn, CEO of the Toy Association, calling the 20% tariffs on Chinese goods “crippling” for the U.S. toy industry, given that nearly 80% of toys sold in the U.S. are manufactured in China.
As both sides dig in, the escalating trade war threatens to disrupt global supply chains, squeeze businesses, and heighten market volatility in the months ahead.