Gavekal Dragonomics

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 pivot to economic stimulus was led by the central bank, but most pundits have been dismissive: monetary policy doesn’t matter, they said, what matters is whether there is going to be a big fiscal stimulus. In this piece, Andrew asks: what if the current obsession with a massive fiscal package is wrong, and the real problem is with monetary policy? What if China’s economy needs not another injection of debt-financed public spending, but simply for lower interest rates to work?

China’s government has announced plans for a RMB1trn national venture-capital fund, putting yet more state money into its commitment to high-tech development. The proposed fund’s size and structure are similar to the “Big Fund” launched a decade ago to accelerate the development of the semiconductor sector. But as Tilly explains in this piece, the goal this time is even more ambitious: to jump-start an ecosystem of hard-tech startups.

New models from AI startup DeepSeek rival some of the capabilities of leading US models at a fraction of the cost. Tilly argues that while some claims about the models are overstated, they vividly demonstrate the ability of Chinese AI companies to innovate around US restrictions—and shifts in the AI industry mean those restriction may become even less of an impediment in the future.

US President Joe Biden escalated the semiconductor war against China with a fresh round of chip export controls, and for the first time, China retaliated immediately with export controls on critical minerals and some technology products. Tilly argues that these restrictions are designed to inflict actual pain, and technology controls are increasingly a two-way street.

China’s central government has pledged two major initiatives to support the property market: encouraging local governments to purchase vacant land from property developers, as well as unused housing inventories. Now local governments are moving forward with the land buybacks, which Xiaoxi argues will provide a backdoor bailout to their state-owned developers.

China’s government is set up for another test of whether it will exceed or disappoint market expectations on support for real estate. Xiaoxi argues that how officials end up managing Vanke will provide an indication of how ready they are to support property developers more broadly, and that will in turn have a real impact on homebuying sentiment—a test that comes at a pivotal moment for the property sector.

In the first days of 2025, Chinese equity markets took a leg down, long-term bond yields hit all-time lows and the renminbi weakened. The government’s promises of more stimulus have not been enough to stabilize expectations. What signals could be more decisive? Andrew makes the case that the most effective policy move would be not more social-welfare support, but a more direct intervention in the property market.

If all of Donald Trump's announced “reciprocal” tariffs go into effect on April 9, the effective levy on US imports will zoom up to over 25%, the highest since the early 1900s and an increase of nearly 20pp from the current level. The big question now is whether the rest of the world will bargain for lower rates, or accept high US tariffs as the new normal and adjust around them. Our team of country economists convened to analyze Wednesday's announcements and discuss what this all means for the global macro situation and for specific regions.

Having been stuck in a funk over the last year, India’s economy is showing signs of perking up. Yet investors continue to fret about the effects of US tariffs and increasingly see better opportunities in China’s cheaper equity market. In this webinar, Udith and Tom seek to disentangle these factors and offer views on whether this is the time to be playing India.

European policymakers face the biggest strategic upheaval since World War II and a potential trans-Atlantic trade war for good measure. On the plus side for those with a Keynesian bent, the European Union may be spurred to cast off self-imposed fiscal rules which have constrained its performance over the last 15 years. In this webinar, Anatole and Cedric assess the choices that Europe faces and what different outcomes will mean for growth and markets.