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.

Donald Trump came to Beijing for his summit with Xi Jinping determined to secure a lot of business for American companies. Despite the positive vibes, the US and China are locked in an intense technology competition, with each side working to build up its own tech ecosystem while using export controls and investment restrictions to hold back the other's progress. In the first edition of a monthly webinar series by Gavekal Technologies, semiconductor/AI analyst Laila Khawaja and new energy analyst AJ Cortese join Arthur Kroeber to discuss the risks that lie ahead for tech companies trying to navigate the US-China rivalry.

Last week, before China shut down for the celebration of the lunar new year, top leader Xi Jinping made one of his traditional local inspection tours. Rather unusually, he chose to do it in Beijing, emphasizing the capital’s contribution to the innovation drive. This choice reflects how Xi’s pursuit of high technology and manufacturing strength has led to a change in his thinking about China’s regional development.

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?

China’s housing market continues to slump, but Shanghai is generating buzz because existing-home sales rose 11% YoY in March. One key reason is the local government’s decision in late February to raise the maximum amount that local homebuyers can borrow from the Housing Provident Fund—effectively cutting the average financing cost for certain homebuyers. Shanghai is not the only city to do so, and in this piece Xiaoxi assesses the impact on the national housing market.

China’s policymakers appear unfazed by the continued housing-market decline, and contend that the market “has entered a bottoming phase.” Xiaoxi examines the evidence and finds the government’s argument uncompelling: with officials unlikely to provide much support and ongoing supply-demand imbalances in many cities, the property market will probably not bottom in 2026.

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.

Global markets are being roiled by geopolitical tensions, rising bond yields and uncertainty over the outlook for inflation and monetary policy. At the same time, the AI boom and shifting trade and capital flows are reshaping the global economic and investment landscape. In our first webinar of the autumn season, Gavekal’s founding partners discuss what these crosscurrents mean for markets and how investors should position their portfolios.

Markets continue to behave as if the world has not fundamentally changed, even as inflation, interest rates, geopolitics and global capital flows enter a new regime. Anatole argues that investors are systematically mispricing four major shifts: the long-term outlook for inflation and bond yields, the global growth cycle, the rotation from AI-led growth to cyclical value and the end of US exceptionalism.

The arrival of a US-Iran deal that would reopen the Strait of Hormuz has the potential to materially reshape the investment environment that has prevailed since February 28. Against a backdrop of artificial intelligence companies seeking to raise massive amounts of capital from investors, Louis and Anatole convene a conversation to explore what comes next.