Chinese stocks extended their winning streak for a third consecutive day on Thursday, as investor optimism continued to build around potential economic stimulus measures from Beijing and a possible thaw in US-China trade tensions.
The Hang Seng China Enterprises Index, which tracks major Chinese companies listed in Hong Kong, surged as much as 4.6% during the morning session before paring gains to close up 1.5%. On the mainland, the CSI 300 Index climbed 1% before the midday break, signaling renewed investor confidence.
This rally reflects a significant shift in market sentiment, as hopes grow for a more aggressive policy response from Chinese authorities to counter a slowing economy. The catalyst? A combination of disappointing economic data and a sharp escalation in trade tariffs by the United States.
On Tuesday, President Donald Trump raised tariffs on Chinese goods to 125%, sparking immediate retaliation from Beijing, which slapped an 84% levy on all US imports. Despite the mounting trade war, Trump predicted that China would return to the negotiating table—especially after the White House included a 90-day pause on tariff hikes for most other nations, suggesting potential space for de-escalation.
“The expectation is that Beijing will roll out broader fiscal and monetary support, especially in strategic sectors like technology,” said Gary Tan, portfolio manager at Allspring Global Investments. “There’s a growing belief that the worst of the tariff war may be nearing a peak, which gives room for markets to breathe.”
Markets are also closely watching an emergency meeting of China’s top leadership scheduled for Thursday. According to sources cited by Bloomberg, the discussions are likely to center around bolstering domestic demand—specifically through support for housing, consumer spending, and innovation.
Adding fuel to the rally, the People’s Bank of China appears to be softening its stance on currency control, with the onshore yuan dropping to its weakest level against the dollar since the global financial crisis. Analysts say the depreciation suggests growing tolerance from Beijing to use the currency as a buffer against external shocks.
In a sign of institutional support, state-backed funds have been actively buying equities and exchange-traded funds this week. In addition, listed companies are being encouraged to conduct share buybacks to stabilize the markets. Mainland investors have also turned increasingly bullish, snapping up HK$6 billion worth of Hong Kong-listed stocks by late Thursday morning—on top of a record HK$35.6 billion splurge the previous day.
Despite these positive signals, some strategists remain wary. UBS analysts led by James Wang cautioned that the recent rally might be premature, citing unresolved trade tensions and global economic uncertainties. “It’s too early to bottom fish,” they warned in a Thursday note.
Still, the ripple effect of stimulus hopes extended into credit markets. The Chinese sovereign credit-default swap index tightened by 7.5 basis points, while risk premiums on dollar bonds issued by Chinese firms narrowed—reflecting renewed appetite from investors.
For now, optimism appears to be outweighing caution. With both Washington and Beijing signaling a mix of confrontation and conciliation, investors are betting that China’s policymakers will step in with decisive action to steer the world’s second-largest economy back on course. Whether that gamble pays off will likely hinge on the outcomes of upcoming stimulus announcements—and the next chapter in the turbulent US-China saga.