What are the the risks and rewards of investing in China?
The outcome of US-China trade talks this past weekend exceeded expectations according to Amundi, Europe’s largest asset manager.
As a result, Amundi has upgraded its forecast for China GDP growth to 4.3% in 2025 and 3.9% in 2026, from 3.9% and 3.7%, respectively. However, this upgrade does not fully restore the 4.4% growth forecast Amundi had at the start of 2025.
Claire Huang, Senior Emerging Markets Macro Strategist, Amundi Investment Institute noted, “While the tightening in global financial conditions was brief and has since normalised, the uncertainty surrounding trade policy remains elevated, continuing to weigh on private sector confidence and is likely to have lasting effects.”
The outcome of the weekend talks significantly reduces the probability China will initiate additional fiscal stimulus in Q3.
“Amundi no longer expects major measures in the very near term as the 90-days pause buys enough time through mid-August.
“Amundi maintains its forecasts that PBoC will proceed with two additional 10bp rate cuts in July and September. As April CPI/PPI shows, deflationary pressures have been persistent, and further monetary easing is much needed regardless of the results of the negotiations,” she added.
“Onshore A-share equity market does not fully price in this outcome, but further upside will be limited since valuation has nearly returned to levels pre-Liberation Day.
“Amundi expects RMB to range bound. Near term the outcome is positive for RMB to rally. However, the outcome is also positive for the US dollar, which could reverse some of its sell-off in past month.”
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