Monday 2nd March 2026
China repriced: trade shifts, sector surges and a new growth model
Tariff fears have faded, but the real story is China’s economic pivot and sharply diverging sector performance. As trade realigns and policy drives self-reliance, new opportunities are emerging beneath the surface.
In the first year of Donald Trump’s second term as US President, there was fear of reciprocal tariffs reaching 60 per cent to over 100 per cent on a wide range of Chinese goods. However, the reality of a 15 per cent global baseline has proven significantly lower than those early projections.
US protectionist policies have accelerated global trade realignment, prompting many countries to diversify supply chains and broaden trade partnerships. A growing number of countries are now actively seeking new or expanded trade agreements with Beijing to stabilise their supply chains and secure access to reliable markets.
In 2025, market performance is heavily skewed towards cyclical and resource-linked sectors, with Precious Metals & Mining, Industrial Metals & Mining, Technology Hardware, Industrial Engineering, Leisure Goods and Electronic & Electrical Equipment delivering the strongest gains. By contrast, property-related and interest-sensitive areas remain weak.
Table 1: Annual performance
| Sector | 2025 | 2024 | 2023 | 2022 | 2021 | 2020 | 2019 | 2018 | 2017 | 2016 |
| China A 200 | 24.4% | 14.3% | –11.5% | -26.1% | –0.4% | 37.0% | 37.3% | -26.4% | 38.5% | -15.5% |
| Automobiles & Parts | 7.2% | 24.6% | -12.1% | -34.4% | -20.4% | 88.3% | 5.9% | -30.6% | 40.2% | -14.1% |
| Banks | 20.3% | 39.8% | -3.3% | -14.8% | -36.4% | 7.7% | 25.3% | -15.6% | 28.8% | -7.0% |
| Beverages | -5.2% | -11.9% | -9.6% | -20.2% | -39.3% | 112.1% | 103.8% | -25.7% | 125.6% | 31.0% |
| Chemicals | 30.3% | -12.6% | -24.1% | -27.8% | -35.0% | 54.9% | 24.2% | -36.0% | 30.3% | -12.0% |
| Construction & Materials | 1.2% | 13.1% | -14.5% | -16.5% | -36.5% | 0.6% | 13.3% | -18.4% | 14.5% | -3.9% |
| Electricity | -1.6% | 18.6% | 10.0% | -18.7% | -15.9% | 5.8% | 3.5% | -8.7% | 19.1% | -25.7% |
| Electronic & Electrical Equipment | 43.8% | 35.3% | -19.1% | -42.2% | -32.2% | 42.8% | 35.9% | -44.2% | 83.4% | -19.8% |
| Food Producers | 10.8% | 1.2% | -22.6% | -21.8% | -40.4% | 74.5% | 53.3% | -23.7% | 87.7% | -2.9% |
| General Industrials | 9.6% | 45.1% | -33.9% | -41.2% | -28.5% | 0.0% | 0.0% | -45.2% | 28.6% | -36.0% |
| Household Goods & Home Construction | -0.3% | 39.9% | -15.9% | -34.7% | -50.2% | 30.4% | 69.1% | -29.0% | 112.5% | 10.9% |
| Industrial Engineering | 44.3% | 4.6% | -2.8% | -27.1% | -41.7% | 50.8% | 31.2% | -29.0% | 13.7% | -26.0% |
| Industrial Metals & Mining | 90.2% | 11.3% | -16.8% | -33.6% | -5.9% | 33.9% | -4.9% | -44.2% | 52.9% | -13.3% |
| Industrial Transportation | -4.2% | 20.9% | -11.7% | -15.4% | -30.5% | 12.7% | 19.9% | -16.1% | 39.9% | -31.6% |
| Leisure Goods | 46.3% | 15.0% | 23.4% | -45.5% | 0.4% | 72.2% | 83.0% | -38.3% | 16.7% | -40.0% |
| Life Insurance | 41.0% | 38.2% | -7.7% | -10.7% | -59.9% | 12.4% | 49.5% | -24.8% | 100.4% | -8.5% |
| Media | 15.2% | 15.1% | -1.1% | 0.0% | 0.0% | 6.9% | 14.0% | -33.1% | -15.3% | -44.2% |
| Pharmaceuticals & Biotechnology | 20.7% | -15.0% | -8.1% | -38.0% | -50.9% | 69.4% | 40.8% | -32.6% | 42.4% | -7.1% |
| Real Estate Investment & Services | -22.4% | -12.6% | -34.6% | -12.6% | -45.1% | -0.9% | 37.0% | -22.8% | 26.2% | -27.4% |
| Software & Computer Services | 9.5% | 1.9% | 4.9% | -26.8% | -43.3% | 68.0% | 58.7% | -35.6% | 52.1% | -57.3% |
| Travel & Leisure | 29.3% | 6.8% | -29.3% | 5.5% | -43.0% | 96.5% | 29.4% | -33.7% | 44.8% | -27.0% |
| Finance and Credit Services | -5.7% | 78.1% | -14.4% | -42.3% | -10.1% | 16.4% | 41.5% | -26.9% | -0.8% | -22.0% |
| Oil Gas and Coal | 9.0% | 21.8% | 23.7% | 12.4% | -22.7% | -14.5% | -3.4% | -19.7% | 16.4% | -8.6% |
| Precious Metals and Mining | 127.9% | 12.8% | 23.1% | -4.3% | -36.8% | 49.0% | 23.8% | -28.1% | 35.5% | -10.1% |
| Technology Hardware and Equipment | 56.2% | 40.3% | -18.8% | -38.7% | -34.7% | 69.3% | 67.7% | -49.4% | 48.5% | -33.6% |
| Telecommunications Service Providers | 4.0% | 20.6% | -1.2% | 8.0% | -43.3% | -14.7% | 12.4% | -22.0% | -6.8% | 12.2% |
Source: FE
China’s consumption pattern and economic transformation
In China’s unique socio-political landscape, a career in the civil service is widely regarded as one of the most prestigious paths a citizen can take.
Although this career offers relatively lower pay than the private sector, it provides exceptional stability and low-risk working status, underpinned by permanent tenure and superior retirement benefits. As the data shows, the demand for these roles has reached a fever pitch. As shown in the data, the number of applicants has surged annually, while the number of vacancies remains strictly controlled.
Why would a young person, under the age limit of 35, choose a defensive, lifelong working option? The motivation is clear: a pervasive insecurity regarding the present, coupled with a highly conservative outlook on future financial stability.
Figure 1: China National Civil Service Examination Applicants vs Vacancies in million
Source: The Guardian.
Certain regions in China are effectively a “civil-servant economy,” meaning that public-sector employment and government expenditure form a significant share of local income and demand. Meanwhile, fiscal pressures across many provinces have led local authorities to tighten revenue collection and enforcement, which in some cases has increased compliance costs for private businesses.
Following the economic reform in 1978, China has experienced one of the most significant episodes of economic growth largely driven by global trades. China, as world manufacturing hub, has benefited from labour-intensive manufacturing industry export-led growth. China’s birth rate has dropped to a historic low over the past year, sparking widespread concern over its future economic vitality. This demographic decline indicates significant headwinds for the country’s long-term growth prospects.
Although several policy initiatives were introduced last year to address the afore-mentioned challenges, substantive structural transformations have yet to be realised. At this stage, China’s primary objective is to bolster domestic confidence to stimulate consumer spending, while simultaneously pursuing a new model of economic growth.
Why China still belongs in your portfolio
Despite pressures from subdued domestic consumption, demographic headwinds and fiscal strain at the regional level, China can still be an attractive component to be included in the portfolio over the coming year. Its market structure, policy direction and sector dispersion offer differentiated return drivers relative to developed markets.
Monetary multi-polarity
There are gradual signs of currency diversification and growing use of alternatives such as CIPS and mBridge, reflecting efforts by some countries to reduce reliance on the US dollar amid geopolitical tensions. Renminbi-denominated assets may emerge as a potential candidate within a gradually evolving, more multipolar currency system.
Self-reliance
Data from late 2025 showed that while Chinese exports to the US fell sharply, its overall global exports actually grew by approximately 5 per cent. By rerouting trade through ASEAN countries and the EU, Chinese firms have proven more resilient to US pressure than expected.
Domestic semiconductor firms such as SMIC, advanced equipment manufacturers and software providers could benefit from US trade tension, even if near-term profitability remains volatile. This “import substitution” theme has been one of the more durable structural investment narratives since the first trade conflict. Recent breakthroughs in Chinese AI (like the DeepSeek model) have boosted investor confidence in China’s “Self-Reliance” strategy, making the tech sector appear less vulnerable to US trade barriers.
State-directed capital
China’s economic structure remains heavily influenced by state ownership, with large parts of the banking system, energy, telecommunications, infrastructure, transport and strategic industrial groups controlled or directed by the government rather than purely market-driven private enterprise.
The rapid expansion in electric vehicle (EV) production and adoption is a clear example, having been supported by subsidies and industrial policy frameworks rather than organic demand alone. More recently, policy emphasis has shifted towards semiconductors and artificial intelligence, particularly the commercial application of AI across manufacturing, healthcare and consumer platforms.
Although China remains behind the global frontier in certain core AI technologies, it has repeatedly shown an ability to scale and industrialise technologies rapidly once their commercial value is established. Given its policy coordination and manufacturing depth, China may be well-positioned to accelerate application-layer deployment even if it does not lead in foundational breakthroughs.
