On May 3, 2025, Mr. Wu Minwen, Chairman of Sensegain Asset Management Group, participated in a series of events organized by the Peking University Southern California Alumni Association and delivered a speech titled "The Threats and Opportunities of the Trade War: Capital Markets, Equity Investment, and Chinese Elements." In his address, Mr. Wu shared his profound insights on the trade war from three perspectives: an analysis of current situation, projections for future trends, and actionable strategies for addressing the challenges ahead. The following is the abridged version of the speech.
1. Recent major events: a huge discrepancy between expectations and reality
In 2025, a trade war suddenly broke out. For the United States, there were three main reasons that triggered it: the continuous decline of the manufacturing sector's share in GDP, the high government debt, and the expansion of the trade deficit in international trade. At the same time, the US capital market also began to experience severe fluctuations, and the US PE/VC investment industry faced huge challenges.
2. Trends in the future: assessing historical episode and identifying turning point of times
In the international trade system, China and the United States play very different roles: the United States has a huge consumption scale but is currently pursuing the return of manufacturing; China is a major manufacturing country but hopes to boost its consumption scale. At the same time, China and the United States are closely related in trade imports and exports, and are each other's important export destinations and import sources, making it difficult to truly decouple. In the short term, the two countries may maintain a standoff situation; in the medium term, they may engage in protracted negotiations and reach a fragile balance.
Judging from the current major policies of the two countries, China has been continuously strengthening its fiscal policy, maintaining a moderately loose monetary policy, vigorously developing service consumption, striving to stabilize the real estate market, accelerating the cultivation of new quality productivity, and introducing policies such as increasing the income of middle and low-income groups and providing targeted support to enterprises heavily affected by tariffs. The United States, on the other hand, is cutting government spending, advancing tax reduction plans, showing a certain tendency towards loose monetary policy, vigorously supporting local industries, enhancing technological control, and tightening immigration policies.
We believe that there is not much downward space for the Chinese capital market and it will be relatively stable. Firstly, the government is making every effort to maintain market stability. Secondly, international capital is being reallocated. Thirdly, the overall valuation is still relatively low. However, the fluctuations in the US capital market may continue, with high market volatility and strong sensitivity.
Since the beginning of this year, the Hong Kong stock market has attracted global attention. Hong Kong's capital market system is inclusive, well-governed, free, and structurally sound. It serves as a window, bridge, and link between China and the world. In response to the delisting risks of Chinese companies listed in the US at present, the Hong Kong Stock Exchange has also been in contact with some enterprises. The return of Chinese companies listed in the US to Hong Kong may accelerate.
According to publicly available data, both the Chinese and US PE/VC investment markets have faced fundraising challenges in the past few years. Looking ahead, we believe that under the backdrop of China's continuous supportive policies, the strong strength of state-owned capital, and the solid industrial foundation for explosive growth, the activity level of China's PE/VC investment market will stabilize and rebound.
3. What should we do: Grasp the bottom line and embrace change
In the face of a complex and ever-changing environment, we should continuously pay attention to technological changes and look to the future of human development, including but not limited to AI, semiconductors, robotics, aerospace, life sciences, new energy, and so on. When conducting asset allocation, we need to choose more countries/region, diversify investment categories, and seize the right opportunities. For overseas Chinese entrepreneurs, it is necessary to make early arrangements for securitization, and consider listing on A-shares or Hong Kong stocks in addition to the US stock market.
Postscript:
This speech was delivered on May 3, 2025. It has been one month since then. The following is an account of the market's major events over the past month.
1. China and the United States have initiated negotiations but have not yet to reach a conclusive agreement.
On May 10th, high-level economic and trade talks between China and the United States were held in Geneva, Switzerland. On May 12th, the "Joint Statement of the China-US Economic and Trade Talks in Geneva" was jointly released. Both sides cancelled the 91% additional tariffs and suspended the 24% tariffs for 90 days, only retaining the 10% reciprocal tariffs. However, this does not mean that China and the United States have truly reached an agreement. The negotiations are still ongoing with many twists and turns.
2. the US debt rating has been downgraded, and the status of the US dollar has been challenged
On May 16, 2025, Moody's downgraded the US sovereign credit rating from Aaa to Aa1, with the outlook revised to stable. Moody's decision to lower the rating was due to the excessively high ratio of US debt and interest payments, the continuous deterioration of the fiscal situation, and the fact that economic and financial advantages were not sufficient to offset the disadvantages in fiscal situation.
Since the beginning of this year, the US dollar has continued to weaken, and during May, the dollar index fluctuated around 100. The Trump administration is relatively inclined towards a "weak dollar" policy, as a weaker dollar can stimulate exports and reduce the trade deficit. However, a prolonged weakening will also affect its status as a global reserve currency.
3. China's capital policy supported the market, and the US stock market rebounded
China’s capital market policies have been active. On May 7, the People's Bank of China, the National Financial Regulatory Administration, and the China Securities Regulatory Commission jointly announced a comprehensive package of financial policies aimed at stabilizing market expectations. The policies include a comprehensive reduction in the reserve requirement ratio, a cut in policy interest rates and housing provident fund loan rates, and an increase in the quota for re-lending for technological innovation and technological transformation, and so on. On May 13th, seven departments including the Ministry of Science and Technology, the People's Bank of China, the National Financial Regulatory Administration, and the China Securities Regulatory Commission jointly issued policy measures, emphasizing the supportive role of the capital market in scientific and technological innovation.
In May, the US stock market rebounded significantly. The S&P 500 index rose by 6.15% cumulatively, the Nasdaq index increased by 9.56%, and the Dow Jones index climbed by 3.94%. This strong rebound was mainly attributed to positive economic data, improved corporate earnings reports, and adjustments in market expectations regarding trade policies.
