Editor's note: From June 9 to 10, the first meeting of the China-U.S. economic and trade consultation mechanism was held in London, UK. After two days of negotiations, representatives from both sides reached a principle-based framework agreement. This marks an important step forward for both countries in implementing the consensus from the Geneva talks and resolving trade disputes. Could this inject stability into the global economy?
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. From June 9 to 10, the first meeting of the China-U.S. economic and trade consultation mechanism was held in London, UK. After two days of negotiations, representatives from both sides reached a principle-based framework agreement. This marks an important step forward for both countries in implementing the consensus from the Geneva talks and resolving trade disputes. Could this inject stability into the global economy? Today, we invite Dr. Wen Jing, postdoctoral researcher at Tsinghua University's Center for Strategic and Security Studies and director of media communication at China Forum; Mr. Deng Yongjian, head of the Chief Investment Office at Singapore Bank's Hong Kong branch; and Mr. Fu Jingtao, chief analyst of A-share strategy at Shenwan Hongyuan, to analyze the signals behind the negotiations and identify investment opportunities. Welcome, everyone!
Dr. Wen, since Trump's inauguration, there have been several rounds of contact between China and the U.S., including the Geneva talks and leaders' phone calls. What does this London meeting indicate? How does the uniqueness of this negotiation compare to previous ones?
【Wen】I think this meeting mainly implied that the economic and trade relationship between China and the United States remains an important component of their bilateral relationship. Another key point is that both sides are still willing to resolve economic and trade issues through dialogue, which reflects a common intent between China and the U.S. Additionally, the Chinese government continues to uphold an open attitude towards equal and mutually beneficial economic cooperation with the U.S. China also insists on maintaining a multilateral trading system and promoting the construction of an open world economy.
This is the main information that both sides wish to convey. Compared to previous negotiations, this time there was a prior phone call between the leaders of China and the U.S., which set the tone for the London talks. The discussions primarily focus on implementing the consensus reached in Geneva, aiming to eliminate mutual barriers and foster goodwill. This serves as the foundation for the negotiations, which differ from the talks in May.
A fundamental difference I see is that it completed the work of constructing a framework for cooperation. The leaders of both parties supported this framework, while the London consultations are more about ensuring its execution. This means that the framework should be substantive rather than just a theoretical concept; it needs to contain real elements. Therefore, we see discussions around core issues between China and the U.S., such as rare earths and chips, which mark a significant departure from past negotiations.
【Anchor】Dr. Wen, the outcome of the negotiations is that "both sides have reached a principle-based framework agreement," which seems to indicate an optimistic outcome, and the capital markets have reacted quickly. In your view, is this outcome optimistic enough, and is there a risk of over-interpretation in the market?
【Wen】The recent negotiations indicate that Vice Minister Li Chenggang, the representative from the Ministry of Commerce responsible for international trade talks, has publicly stated that the communication between China and the U.S. over the past few days has been very professional, rational, in-depth, and candid. This is relatively positive for the outside world, suggesting that the overall outcomes and expectations of the recent talks in London are quite optimistic.
Currently, the framework agreements reached in these London talks likely cover several key areas, including China's export controls on rare earth elements (REE) to the U.S., the resumption of Sino-U.S. educational exchanges, and further measures to reduce tariffs between the two countries. However, specific details have not yet been fully disclosed. Overall, the current state of China-U.S. relations is positive.
That said, it is difficult for the market to be overly optimistic because the strategic and structural contradictions between China and the U.S. remain unresolved. The current U.S. administration continues to view China as a strategic adversary, and this fundamental attitude has not changed. Therefore, while substantive communication is taking place through negotiation mechanisms, the underlying conflicts between the two sides have not been fully addressed.
【Anchor】 At the beginning of the negotiations, the U.S. side actually expressed optimism earlier than the Chinese side, whose initial statements were more cautious. What do you make of this difference in attitude?
【Wen】This disparity in attitudes reflects the differing psychological expectations each side has of the other.
What accounts for this difference? Between the Geneva talks and the recent London negotiations, China has consistently adhered to the spirit of the Geneva discussions, emphasizing the need for strategic restraint and maintaining a friendly atmosphere. In contrast, the U.S. seems to have engaged in various tactical maneuvers following the negotiations. For instance, recently, the U.S. imposed restrictions on Chinese students, requiring them to leave and not issuing new visas to incoming students. This can be seen as a form of pressure on China.
As a result, China's expressions and commitments towards the U.S. are now viewed with skepticism. The differences in attitudes after the London talks stem from a fundamentally different level of trust between the two sides.
【Anchor】Mr. Deng, although there have been relatively positive breakthroughs at the macro level in the China-U.S. negotiations, there will still be long-term competition in specific areas, especially in technology fields like semiconductors and biomedicine. How do you assess the impact of these macro-level advancements on these sectors? How should investors respond?
【Deng】In the short term, industries like semiconductors and biomedicine may be affected, as they face restrictions under U.S. tariff policies, which is unavoidable. However, due to this situation, we have been advising investors since last year that when making long-term asset allocations, it is more important to focus on long-term investment strategies. Given the changing global landscape and ongoing geopolitical shifts, we see many deteriorating conditions. Inevitably, in different countries, especially in the competition between China and the U.S., the impact on various industries can vary from one day to the next.
What's more important, I believe, is to pay attention to or identify industries with long-term growth trends or significant trends. For instance, as we have been advocating since last year, sectors like AI and the structural changes in population demographics lead to shifts in demand for medicine and healthcare, which may also affect global consumption and financial needs differently.
When we identify these industries with secular growth, I think it is crucial to focus on them. Of course, there may still be fluctuations in between, such as in the semiconductor sector, which is a sub-industry of AI. Fluctuations are natural, but as long as there is long-term value, it is more important to focus on the leading companies in different industries. When they correct, there could be better opportunities for entry.
【Anchor】Based on the current situation, Mr. Deng, which sectors do you think are worth focusing on in the second half of the year?
【Deng】For the second half of the year, we are relatively optimistic about technology, AI, and consumer staples. Consumer spending has been performing moderately from the beginning of the year until now. However, we believe this makes their valuations relatively cheap and reasonable. As the market digests the impact of tariffs and other economic factors, I think both the U.S. and China will introduce different measures to stimulate the economy, which could boost the consumer sector. Since it has relatively underperformed and has not-so-expensive valuations, there might be an opportunity for a rebound.
As for technology stocks, we have always been optimistic about them. However, there may have been significant short-term increases, and after some corrections, I believe that in the long run, it is still essential to pay attention to this sector.
【Anchor】In the context of tariff competition, the market trends in Hong Kong and mainland China are also a focal point. In 2018, the upward momentum of the A-share market was interrupted due to multiple factors, including trade friction.
Regarding the impacts of this round of China-U.S. tariff competition, Fu Jingtao, chief analyst of A-share strategy at Shenwan Hongyuan, pointed out that the A-share market will continue to be in a volatile range from the second to the third quarter of 2025. Breaking out of this volatile range will require a resonance of multiple economic factors.
【Fu】The only unique point in this context is August 2017, where the upward trend only continued until January 2018. In our view, August 2017 marked the first window for the release of structured products issued in 2015. If fundamental and policy factors had aligned, the market in 2017 and 2018 could have had a more significant upward trajectory. However, the actual situation in 2018 was that the China-U.S. trade friction began, along with the impacts of new asset management regulations, which interrupted the upward trend.
Once the trading range following the end of the bear market breaks upward, it often signifies the main wave of a bull market. Thus, the conditions for what has been widely discussed in the market regarding breaking out of the trading range have, in some dimensions, been too weak and the logic is not at the bull market level, which prevents them from breaking through. Therefore, it is highly likely that from the second to the third quarter of 2025, the A-share market will continue to be in a trading range. Achieving a breakthrough here is not easy and requires the resonance of multiple fundamental factors.
At the same time, the clues for improving the supply-demand structure that began in 2025 may see a significant increase starting. The market's alpha-generating opportunities are expected to accumulate further.
We maintain our overall judgment that the A-share market is in a high central oscillation phase. Ultimately, in terms of structural selection, we still emphasize that a return to a structural bull market in the A-shares will likely need to wait for the catalysts from the technology mid-year reports to materialize. Domestic AI, including embodied AI and the national defense and military industry, has the potential to become a core industry in this structural bull market trend.
The third phase of the interaction between the primary and secondary markets is currently at a significant starting point for a major trend. From the perspective of the primary market improving rapidly and reflecting on the secondary market, we will focus on investment opportunities in areas such as software information, hardware technology, pharmaceuticals, as well as new consumption segments like consumer goods, pet services, and outdoor tourism.
【Anchor】Fu Jingtao also mentioned that in the context of tariff competition, Hong Kong stocks are likely to leverage their existing advantages to become China's leading benchmark market across all categories.
【Fu】We observe that representative assets in the A-share market are rapidly listing on the Hong Kong market, and secondary listings have become a trend. Furthermore, the Hong Kong market has stronger representation in sectors such as internet, new consumption, and innovative pharmaceuticals, which may allow it to become the leading benchmark market for all categories in China for the first time since the bull market began. From a top-down perspective, we believe this is a key link in the construction of China's offshore financial hub. This indicates that the policy positioning of Hong Kong stocks has fundamentally changed.
At the same time, we highlight that high-dividend state-owned enterprises in Hong Kong stocks are a key direction for insurers' strategic holdings. With the resonance of domestic and foreign capital pricing during China's strategic opportunity period, Hong Kong stocks represent a convergence point for domestic and foreign capital. Therefore, we suggest that the Hong Kong stock market in 2026 to 2027 may resemble the ChiNext market from 2013 to 2015.
【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, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
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