
Export anchor, reflation stirrings. Following our previous update (“China/Hong Kong Equities: First Whiffs of a Pivot”, published on 29 Apr 2026), China’s economic fundamentals have continued to stabilise, supported by resilient export performance and early signs of reflation. Export growth remained robust, with shipments of high-tech and new energy products helping to offset yet-to-recover domestic demand. Industrial production has also shown signs of bottoming, while selective price indicators suggest that deflationary pressures are gradually easing. While the property sector remains a drag, policy measures aimed at supporting consumption and stabilising expectations have helped to fend off a sharper downturn. The result is a more balanced, if still modest, growth trajectory.


High-tech edge, geopolitical tailwind. At the same time, markets are gradually repricing China’s entrenched strength in high-tech manufacturing. In an environment of rising geopolitical fragmentation and supply-chain diversification, the country’s integrated ecosystem in electronics, new energy, and advanced components has become strategically valuable. These capabilities are gaining recognition as global players seek to reduce concentration risks, adding a structural dimension to China’s external positioning.

Policy backing for high-tech industries. This shift is being reinforced by targeted policy support. Authorities have prioritised the development of “new quality productive forces”, with measures aimed at advancing AI, semiconductor advanced manufacturing, and robotics. Recent initiatives include regulator reforms to channel capital into substantive innovation, support for large-scale data centre and AI infrastructure investment, and tighter oversight of outbound investments to safeguard technological advancements. These policies are designed to strengthen self-reliance while positioning China more competitively in strategic sectors amid global fragmentation.
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