Gavekal Dragonomics

China’s central bank is once again erring on the side of caution. It is on track to reduce rates by much less in 2025 than first expected—expectations that the PBOC itself created with a formal shift in its monetary-policy stance. This is a frequent pattern for the PBOC, which typically moves rates much less than other central banks. In this piece, Wei argues that the PBOC’s ingrained caution is less a philosophical choice than an institutional constraint, stemming from its lack of independence and multiple mandates.

Unless something changes radically in the next few days, China is facing a major growth shock from the US imposition of massive tariffs. The question now is how China’s government will respond to intensifying growth fears. Wei argues that the first step should be an easing of monetary policy, and possibly more direct intervention from the central bank in financial markets.

The People’s Bank of China has been busy over the past year as its new governor, Pan Gongsheng, has overseen multiple interventions in financial markets and attempted risky policy changes. Wei argues that Pan’s aggressive policymaking style, along with a green light from top policymakers for more easing, means the chances of a large interest-rate cut are rising.

China’s technology companies face two big external obstacles to progress. Semiconductor companies and AI developers have to deal with US export controls while electric vehicle and green energy companies are up against protectionist barriers. But how effective are these barriers really?

Top leader Xi Jinping has decided that promoting technology and modernizing industry will continue to be the top priorities in China’s next five-year plan, as they are in the current plan. But as Tilly explains in this piece, that doesn’t mean China is simply doubling down on its existing industrial policy. There are important changes in priorities and strategies: a greater focus on commercializing products to drive growth, and a stronger role for central government coordination.

Nearly three weeks after Presidents Donald Trump and Xi Jinping made nice in South Korea, the details of the US-China trade ceasefire are still being worked out. The main sticking point is Beijing’s licensing terms for exports of rare earth and other critical materials. Also in today’s Gavekal Technologies Briefing, we consider the possibility that the US might be able to break China’s rare-earths chokehold sooner than expected, and report on the Chinese pharma industry’s struggle to generate profits.

After the Shenzhen government abruptly reversed course on its partial bailout of China Vanke, the troubled developer’s bondholders convened on Wednesday to discuss its request for a repayment delay. Xiaoxi argues that the government’s approach to the company has been riddled with reversals because officials are struggling to balance conflicting policy goals for the property sector—and there may be more to come.

China’s property prices are declining at an accelerated pace, with the market stuck in a negative feedback loop the government seems unwilling to reverse. The property-support policies it has introduced have not gained traction, but there is little political effort going into improving their implementation. As Xiaoxi argues in this piece, a continued property downturn will cut against the government’s efforts to boost consumer spending.

China’s property market has been in a funk for four years now, and hopes for government intervention have consistently disappointed. Xiaoxi argues that this week’s Central Urban Work Conference showed no urgency for a major change, instead signaling acceptance of a slow- or no-growth future for the property sector. Nonetheless, policymakers will probably need to introduce some measures in coming months to prevent the housing downturn from getting even worse.

To close out the year, Gavekal’s three founding partners convened to discuss the investment environment heading into 2026. Asset allocators must ponder where the US-China technology rivalry goes from here and whether the two economies can reconcile their differences, if the US consumer can stand up to the pressure, and the relative appeal of emerging markets in regions like Latin America.

Europe’s economy has been hit by a series of external shocks since emerging from Covid lockdowns but seems to be finding a new dynamic through a strengthening domestic investment cycle. In this webinar, Cedric and August explore what this means for growth, inflation and monetary policy. They also outline how this informs their views on the euro and eurozone bonds and equities.

The Xi-Trump meeting October 31 in South Korea left a wake of positive vibes, but also a lot of unanswered questions: exactly how much the US and China will really roll back their respective export controls on semiconductors and rare earths, whether the dispute over Nexperia's ownership will be resolved, and most important, how long this latest truce in the US-China tech competition will last. In this webinar, Arthur Kroeber and Gavekal Technologies research director Laila Khawaja discussed the latest twists and turns.