[WORLD] Mainland Chinese equities have shown greater resilience to global market turbulence—largely sparked by the US tariff dispute—than many of their international counterparts. Analysts attribute this stability to government-led market support and unexpectedly solid economic data, noting that Beijing is expected to maintain firm oversight using various tools at its disposal.
The resilience comes despite lingering concerns about China's property sector slowdown and local government debt burdens. However, recent policy measures, including targeted liquidity injections and debt restructuring programs, have helped prevent these domestic challenges from spilling over into broader market instability. This dual approach of addressing internal risks while buffering external shocks has been crucial to maintaining investor confidence.
A central pillar of this market stability has been the active participation of state-backed entities, commonly referred to as the “national team.” These funds have intervened during sell-offs to steady the market. Coupled with tight capital controls that curb speculative capital outflows, these efforts have shielded domestic markets from the worst of global financial swings. Meanwhile, upbeat data—such as stronger-than-expected manufacturing PMI and robust retail sales—have reinforced investor confidence in China’s economic strength.
Notably, the tech and green energy sectors have emerged as relative outperformers, benefiting from government subsidies and policy support. This selective strength has helped offset weakness in more tariff-sensitive industries, creating a balancing effect within the CSI 300 index composition. The bifurcated performance underscores how China's industrial policy priorities are increasingly reflected in market outcomes.
Since US President Donald Trump announced reciprocal tariffs on April 2, China’s CSI 300 Index—which represents the largest onshore-listed companies—has declined by 2.6 per cent. By contrast, the S&P 500 has dropped nearly 6 per cent, with Hong Kong’s Hang Seng Index and Japan’s Nikkei 225 down 7.5 per cent and 3.8 per cent, respectively, over the same period.
The relative outperformance is particularly notable given China's heavier weighting in cyclical industries that typically bear the brunt of trade disputes. Market strategists suggest this anomaly reflects both the effectiveness of government support measures and investors pricing in expectations for further stimulus, should trade tensions escalate significantly in coming months.
Analysts also highlight China’s ongoing financial liberalization as a source of stability. The phased inclusion of A-shares in global benchmarks such as the MSCI has attracted a wave of long-term institutional investors. Still, there is concern that protracted trade tensions could weigh heavily on export-dependent sectors if tariffs are extended. Beijing retains the ability to cushion the blow through fiscal measures—including infrastructure investment and tax relief—though excessive government involvement, some warn, risks distorting market fundamentals over time.
When it comes to volatility, the CSI 300 has seen the smallest fluctuations among major indices, recording a 10 per cent swing this month. In comparison, both the S&P 500 and Nikkei 225 have moved by around 15 per cent, while the Hang Seng Index has seen an 18 per cent fluctuation, according to figures from Shanghai DZH, a financial data provider.
The volatility differential has prompted some foreign investors to increase their hedging activities in Chinese markets, with derivatives trading volumes reaching record levels. While this suggests growing sophistication in risk management approaches, it also indicates that global funds remain cautious about potential policy surprises or abrupt changes in Beijing's market support stance.
Looking forward, investors are closely monitoring policy signals from Beijing, particularly any shifts in monetary strategy or support measures for industries most vulnerable to trade frictions. Thus far, the People’s Bank of China has taken a measured approach, avoiding wide-scale stimulus that could aggravate financial risks. Simultaneously, the government’s push for technological independence and stronger domestic consumption is expected to continue reshaping market dynamics, gradually reducing the country’s exposure to unpredictable global trade flows.
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