China looks to spring forward

China has completed its annual meeting of the National People’s Congress (NPC), setting its economic goals for 2025.  The NPC reaffirmed a gross domestic product (GDP) growth target of “around 5%” as the central government plans aggressive policies to encourage consumer spending.

On March 16 the Chinese government announced a “special action plan for stimulating consumption.” The plan addressed ways to expand incomes, support consumption, enhance the service sector, upgrade big-ticket consumption and reduce consumption restrictions.

The central government has refocused its efforts back to growing the economy. This could already be seen in a February 17 symposium, where President Xi Jinping aimed to affirm the government’s commitment to private industry. Among the attendees was Alibaba founder Jack Ma, who has been largely out of sight for several years.

The country’s property market seems to be firming up, with prices in top-tier cities stabilizing and a secondary property market price index ticking higher in recent months.

Chinese equities have had a good year thus far, too, with the Hang Seng index up 24%. Can that continue? Subject to consolidation, I am optimistic that it can.

Despite facing a challenging environment, Chinese tech companies have improved efficiency in recent years while continuing to invest in innovation. These firms’ earnings have grown while valuations remain cheap, particularly compared to US peers, and they have recently enjoyed catalysts like DeepSeek and BYD’s five-minute EV charger.

What are the risks? The chief risk used to be policy support but that now looks to be resolved. Next is the geopolitical risk of a trade war or a tech war. In the first Trump administration, though, tariffs didn’t seem to hold back Chinese exports very much. The prospect of tariffs may weigh on sentiment, but the Chinese share of global exports has stayed around 15% since Trump’s first round of tariffs began in 2018, so the fundamentals are likely to remain intact. As for Chinese tech companies, they have a domestic focus (and a brightening outlook).

There could well be a consolidation after a strong run. The Chinese government will want to ensure 5% growth materializes, though, and will likely be prepared for further stimulus as needed. This should put a floor in for equities, which has already allowed some re-rating to occur. The medium-term outlook remains promising, with improving fundamentals, low valuations and, now, policy support.