Source: State Council, MOF, other government websites, Credit Suisse 

China’s stocks had a roller coaster ride in the week of 14 March, when a drastic turnaround was triggered by Chinese Vice Premier Liu He’s chairing a meeting in response to market volatility and investor concerns. Various government departments also followed with announcements, including China-US audit talk progress, a delay of property tax pilot scheme and encouragement of increased equity investment from long-term institutional investors. This reminds us of late 2018, when the US-China trade war and the then deleveraging campaign domestically triggered market turmoil. At this point investors may be relieved, but are still seeking clarity and more actions, including pro-growth macro policies, further relaxation on property, and constructive dialogue between the US and China.

Concerns about forced delisting of Chinese ADRs have been a key overhang since the Holding Foreign Companies Accountable Act (HFCAA) was signed into law. A few recent positive developments by both sides raised hope of restoring investors’ confidence. Hong Kong is a good complementary listing destination for Chinese companies, but we believe a healthy ADR market is crucial for China’s successful capital market development.

Covid resurgence has brought challenges to China’s export, but the impact does not seem significant, given the government and business operators’ accumulated experience. Still adhering to the Covid-zero strategy, the government also began considering economic and social implications, which offers room for policy fine-tuning on conditions of wide vaccination coverage and the availability of therapies.