Editor's note: During the Spring Festival period of the Year of the Snake, overseas markets experienced continuous fluctuations. The emergence of DeepSeek has led to a reevaluation of the value of Chinese assets, with Deutsche Bank and several other foreign institutions bullish on China. Meanwhile, Trump's tariff policies have become an uncertainty in the market that cannot be ignored.
【Anchor】Hello everyone, and Happy Year of the Snake. Welcome to DDN Business Insider. I am Yunfei Zhang. As the Spring Festival holidays in mainland China and Hong Kong gradually come to an end, overseas markets have been experiencing continuous fluctuations during the trading halt. On one hand, the emergence of the Chinese AI company DeepSeek has dealt a significant blow to American tech stocks. On the other hand, Trump's proposed tariff policies have brought the trade war to the brink. So, under the influence of various factors, where will the global economy and financial markets head in 2025? To discuss these topics, we have invited Li Daxiao, former chief economist of a brokerage firm, Ren Libin, founder and president of Yuanda Investment Co., Ltd., and Cui Dingbang, the executive director of the Hong Kong Tourism Association to provide their insights and analysis. Hello everyone.
【Anchor】Looking back at the changes in overseas capital markets during the Spring Festival holiday, DeepSeek is an unavoidable topic. The meteoric rise of DeepSeek has led investors to price in a potential downturn in demand for high-tech semiconductor chips. The resulting domino effect has caused a massive drop in the U.S. stock market, particularly in the tech sector. Data shows that U.S. chip giant Nvidia lost about $592.7 billion in market value on January 27, setting a record for the largest single-day market value loss in U.S. stock history. In contrast, Hong Kong's AI concept stocks have continued to strengthen after the Spring Festival holiday, to propel the Hong Kong stock market to outperform amid a general decline in Asian markets.
Zhao Yaoting, global market strategist at Invesco for the Asia-Pacific region (excluding Japan), noted that the gap in AI development between China and the U.S. is narrowing. Future models may rely more on application-specific integrated circuits (ASICs) rather than GPUs. Similarly, Chinese stocks, particularly those of Chinese tech companies, are significantly undervalued compared to their American counterparts, and the valuation gap between Chinese and U.S. stocks is also narrowing.
【Anchor】So, I would like to ask Ms. Ren first: what do you think of this viewpoint? There is actually another perspective that DeepSeek does not completely compete with American AI companies (like OpenAI and DeepMind) on the same target dimension. Why is that? Will the financial market changes brought by DeepSeek become a long-term trend?
Should the valuation gap narrow, DeepSeek's advantage of low cost and high performance may drive investors to reassess the technological potential of Chinese tech companies, thereby narrowing the expectations gap between Chinese and American tech. This could catalyze a revaluation of tech stocks in both China and the U.S. In terms of competition, DeepSeek's main innovation lies in incorporating reinforcement learning during the pre-training phase, which significantly reduces the training and transfer costs of large AI models. In contrast, American AI firms are focused on scaling GPU clusters to develop next-gen large models. So, the paths are different and there are differences in target dimensions. In the long term, the most significant meaning of DeepSeek is that it provides an opportunity for a value reassessment of the domestic AI industry. The rise of DeepSeek will not only affect the valuations of Chinese and American stocks but may also change the global tech competition landscape. I believe that DeepSeek's market impact is likely to be sustained. As the competitiveness of Chinese tech companies increases, global capital will focus more on the Chinese market. The competition between Chinese and American tech companies will also drive global technological advancement and capital flows.
【Anchor】Good. Mr. Li, what do you think of this trend, and what are your expectations for the next phase of the mainland stock market?
After the Spring Festival, the market's high opening reflects a relatively optimistic atmosphere. This marks the beginning of spring and a new year, which is a good sign. If we look at the data from February, since 2010, the probability of an upward trend in February post-Spring Festival stands at 73%. Given this high win rate, I think the recent pullback on February 5 might be a false move. I've always believed that there is logic to the Spring Festival red packet; the New Year red packet won't be too short-lived. It won't disappear just one second after the New Year. The real show has just begun, of course, limited to good stocks.
【Anchor】Alright. In addition to DeepSeek, Trump has imposed additional tariffs on several countries, and the risk of a new trade war is also unsettling global markets. In response to Trump's actions, China has implemented "five-pronged countermeasures", including a 10%-15% tariff on certain imported goods from the U.S. starting February 10, 2025, Additionally, China has listed two U.S. companies on the Unreliable Entity List and has initiated the antitrust investigation against Google, while also announcing export controls on 25 rare metal products and their technologies. Some organizations believe that China's countermeasures are relatively restrained, preparing for negotiations. However, Trump has said he is not in a hurry to speak with Chinese leaders. Mr. Li, what do you think about this?
From the perspective of tariffs, there will indeed be certain shocks and impacts. The ensuing countermeasures were expected, and we need to continue negotiations and responses to mitigate the impact of ongoing tariff hikes. More importantly, globalization remains the way forward; cooperation and division of labor, as well as the further expansion of our global trade, are the right path. Expanding our economic and trade relations is essential, and closing off or using tariffs is not the mainstream direction. Our trade diversification efforts are gaining momentum, and proportionally, our trade volume with the U.S. has dropped from first to second place, while our trade in other areas continues to expand. This is also one of the methods and strategies for response, especially with the rapid expansion of Belt and Road Initiative, which ensures that our globalization efforts will not regress due to tariff issues.
【Anchor】Yes. Ms. Ren, what are your expectations for the future changes in tariff policies between China and the U.S.? How will these changes affect the future economic outlook for China, the U.S., and the world?
The U.S. is likely to maintain or even escalate tariffs on Chinese goods or introduce new tariffs in certain areas based on various political and economic factors. Trump has previously stated that if he chooses wisely, he could impose a 60% or higher tariff on all Chinese goods. While tax reduction policies may lower macroeconomic pressures in the U.S., the tendency to impose tariffs remains clear. For China, high tariffs may increase costs for exporting companies and reduce orders, but they will also prompt China to accelerate industrial upgrades and market expansion. For the U.S., increased tariffs will raise the costs of imported goods, suppress consumption and business investment, and hinder related industry development. On a global scale, Sino-U.S. tariff tensions could destabilize global supply chains and affect global trade and economic growth.
【Anchor】Alright. In addition to external factors, domestic data on consumption, tourism, and box office figures following the Spring Festival have attracted widespread attention. Data shows that during the eight-day Spring Festival holiday, 501 million domestic trips were made, a 5.9% increase year-on-year; the total spending on domestic travel reached CNY 677 billion, a 7.0% year-on-year increase. Moreover, the box office for Spring Festival films surpassed CNY 10 billion, setting a new historical high. Against the backdrop of emphasizing expanding domestic demand for a long time, how do you evaluate this year's data?
The growth in domestic travel and spending indicates a gradual recovery of the consumer market. The box office exceeding CNY 10 billion marks a historical high, reflecting strong demand for cultural consumption. However, in other areas, such as retail and dining, growth may be relatively sluggish. Some high-end and durable consumer goods show that there are differences in consumer capacity and willingness across different sectors.
【Anchor】Is there any weakness behind these data? How do you think improvements can be made, especially with the upcoming "Two Sessions" period? What areas can we look forward to?
I believe that despite the overall good consumption data, structural imbalances persist in consumption. For example, the growth in retail, dining, high-end consumption, and durable goods is relatively slow. Additionally, in some first-tier cities, the growth rate of consumer traffic is lower than the national average. To improve, I suggest continuing to strengthen employment protection and income enhancement policies to boost residents' consumption capacity. Secondly, optimizing the consumption environment, promoting consumption upgrades, and increasing policy support for emerging consumption sectors will help diversify consumption. For first-tier cities, further optimizing the consumption environment, developing distinctive consumption, and enhancing consumer experience are crucial. Regarding the expectations for the "Two Sessions", I hope they will introduce policies to expand domestic demand, promote consumption, improve the social security system, and enhance residents' confidence in consumption.
【Anchor】The Lunar New Year is also a peak season for tourism consumption in Hong Kong. According to data from the Tourism Board, approximately 1.07 million visitors came to Hong Kong during the Lunar New Year from January 28th to February 2nd (from the 29th day of the twelfth lunar month to the fifth day of the first lunar month), marking a 3% year-on-year increase, which is considered a recovery beyond expectations. I would like to ask Mr. Cui, what is your view on this?
I think the estimates from the SAR government and the actual figures that have come out—I've done my own calculations. Starting from about the 26th of the lunar month, I've calculated that the number of visitors from Mainland China to Hong Kong is as high as 1.6 million. Furthermore, it's evident that mainland guests visiting Hong Kong have had a very positive experience in terms of consumption and tourism, especially participating in our large events. So this year, Hong Kong's tourism sector is off to a promising start, and I hope we can continue to recover throughout the year alongside other related industries, such as retail and dining.
【Anchor】What areas do you think need further improvement?
Also, I've noticed a situation. I observed that especially on the 3rd, 4th, and 5th days of the new year, the passenger flow on the Guangzhou-Shenzhen-Hong Kong Express Rail Link was extremely high. However, during the holiday period, some mainland friends were unable to buy train tickets, which prevented them from coming to Hong Kong. I hope this year the government can not only promote the Guangzhou-Shenzhen-Hong Kong Express Rail Link but also intensify the promotion of our cross-border bus services. This way, travelers will know that there are public transport services and cross-border buses available, allowing more travelers to visit. The key is that the more transportation services we have, the more travelers we will attract. I saw that on the 3rd, 4th, and 5th days, the transportation capacity was very high, so it's indeed unfortunate that some mainland travelers couldn't buy train tickets and ended up unable to come to Hong Kong. Therefore, I think we should continue to increase transportation capacity so that more travelers can come to Hong Kong and enjoy their spending.
【Anchor】After the Spring Festival holiday, the market is about to welcome the "Two Sessions." What expectations do you have for the "Two Sessions market" and the economic policy direction for the entire year?
The strengthening of our consumer market, the measures to stimulate consumption, and a series of efforts to further expand domestic demand will likely not only occur before the "Two Sessions" but may also extend throughout the year. I believe this could become a very important task. Before the "Two Sessions", our capital market may show a strong performance, as the overall proactive macro policies will gain more momentum. This includes active fiscal policies and moderately loose monetary policies, which will create a good atmosphere for the market. Overall, we still had quite a few positive news during the Spring Festival period.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung | Translate: Kato Ip | Proofread: Chris Liu
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