Key Takeaways
A tactical window is opening for Chinese stocks ahead of a planned mid-May summit between U.S. President Donald Trump and Chinese President Xi Jinping, according to a new strategy report from Goldman Sachs.
"Supported by historical trading patterns, low investor expectations, and the attractive risk-reward profile of Chinese stocks, there is tactical upside for Chinese equities ahead of the meeting," Goldman Sachs said in the report. The bank maintained its Overweight rating on both A-shares and H-shares.
The investment bank highlighted Chinese companies that export to the U.S. and heavily shorted Hong Kong-listed stocks as likely to deliver short-term excess returns. The call comes as the offshore yuan (USD/CNH) holds steady near the 7.25 level and traders watch for any shifts in the U.S. 10-year Treasury yield, which could influence global risk appetite leading up to the talks.
The summit offers a potential, if temporary, reprieve in a broader strategic rivalry. While Goldman Sachs sees a "low probability of a 'grand bargain'," the potential for a limited deal could be enough to spark a rally in beaten-down Chinese names. This follows a period of uneasy détente after Xi successfully countered Trump’s 2025 tariff escalations by leveraging China's dominance in rare earth minerals.
Goldman's strategists expect China to offer concessions on trade in exchange for breathing room on technology. The anticipated deal would likely involve increased Chinese purchases of U.S. agricultural products, energy, and manufactured goods. In return, Beijing would seek a rollback of some U.S. technology restrictions and slightly lower tariffs.
This transactional approach aligns with the precarious state of the global economy, where both leaders are incentivized to project stability. The U.S. is contending with the economic fallout from its war with Iran, while China's economy is facing its own internal headwinds. According to experts at the Council on Foreign Relations, Beijing may use the summit to "'manage' the United States, inducing Trump to put off necessary competitive steps for the sake of bilateral stability."
While investors may find short-term opportunities, the summit does little to alter the long-term competitive dynamics between the two powers. The meeting occurs as the U.S. war against Iran, a key Chinese partner in the Middle East, strains global energy supplies and military resources. Analysts note this conflict has weakened the U.S. position, drawing focus and munitions away from the Pacific.
At the same time, China has solidified its control over critical mineral supply chains, a key vulnerability for U.S. defense and advanced manufacturing. As noted by Bloomberg Opinion, Xi is likely using this period of relative calm to strengthen China for a confrontation he sees as inevitable, stockpiling commodities and advancing his military's capabilities for a potential Taiwan contingency by 2027. The underlying rivalry in artificial intelligence, semiconductors, and regional influence continues to intensify, suggesting any market rally based on the summit's outcome may be short-lived.
This article is for informational purposes only and does not constitute investment advice.
