Latest / China Economy with Fexingo: Beijing's Policies, Trade, and Asia-Pacific Markets / How China Tech Stocks Are Surging on Trade Deal Hopes
Transcript
- Lucas: So it's Wednesday, July 8th, 2026, and Chinese tech stocks are having a week. Alibaba's up more than 11% in five days. JD's up 5%. The KWEB China internet ETF is up 5.3%. Even the broader FXI, which tracks the big Chinese companies listed in Hong Kong, is up nearly 5%. That's a big move in a market that's been pretty range-bound this year. Luna: Yeah, that's a notable rally. What's driving it? Is this just a short squeeze or is something actually changing? Lucas: I think it's a mix. The biggest catalyst seems to be renewed trade deal optimism. Over the past week, we've seen signals from both Beijing and Washington that they might be ready to sit down again. The chatter is around a potential phase two deal, or at least a tariff rollback on some consumer goods. And the market is grabbing onto that. Luna: Right, because tariffs have been such a headwind for these companies. Alibaba and JD especially rely on cross-border commerce and consumer sentiment. Lucas: Exactly. And it's not just trade noise. You've also got the dollar weakening. The trade-weighted dollar index is down to 120.7, which is a multi-month low. A weaker dollar makes Chinese assets more attractive to foreign investors, and it gives Beijing more room to ease policy without worrying about capital flight. Luna: The yuan is at 6.79 per dollar, which is basically flat on the week but still at a level that's competitive for exporters. Do you think the PBOC is actively managing it to support growth? Lucas: Absolutely. They've been keeping the yuan in that 6.7 to 6.9 range for months now. It's a sweet spot: weak enough to help exports — and we saw exports of goods and services rose to $3.5 trillion in the first quarter — but not so weak that it spooks foreign investors. The trade balance did widen, but that's more about imports growing faster as domestic demand picks up. Luna: And then there's the domestic side. There were reports last week about Beijing considering another round of fiscal stimulus — more infrastructure spending, maybe some consumer vouchers. That would directly benefit companies like Alibaba and JD. Lucas: Right. Consumer sentiment in China has been fragile, but any sign of government support tends to lift the e-commerce names. Pinduoduo is up 2.8% this week, and they're the ones winning the value consumer bet, as we've discussed before. So the market is pricing in a scenario where trade tensions ease, the dollar stays soft, and Beijing adds stimulus. That's a pretty bullish cocktail. Luna: But there are headwinds too. Oil prices are spiking on the Iran situation — the Dow just dropped 500 points today. If energy costs keep rising, that's going to hit Chinese manufacturers and consumers. Lucas: That's the big risk. Oil is a major input for China, and higher prices could squeeze margins and curb consumer spending. Plus, the Fed minutes today showed that officials were split on rate direction. If the Fed ends up hiking again, the dollar could strengthen, which would reverse some of the tailwinds for China stocks. Luna: So the rally is real, but fragile. It's based on expectations that could easily be dashed. Lucas: Exactly. And that's why I think the move in Alibaba is so striking. 11% in five days is a bet that the trade narrative is about to change fundamentally. If it doesn't, those gains could unwind quickly. But for now, the momentum is clearly with the bulls. Luna: It's interesting — a year ago, Chinese tech was basically uninvestable for a lot of global funds. Now you're seeing inflows again. The KWEB ETF is up over 20% year-to-date. Lucas: Right. The regulatory crackdown is mostly in the rearview, companies are reporting better earnings, and valuations are still reasonable. The price to earnings ratio on the FXI is around 10, which is cheap compared to the S&P 500. So there's a value argument too. Luna: But the trade war is still a thing. Tariffs are still in place on hundreds of billions of dollars of goods. A rally based on hopes of a deal feels a bit speculative. Lucas: It is speculative. But markets are forward-looking. If you wait for the deal to be signed, you miss the move. The question is whether this is the beginning of a sustained re-rating or just a relief rally. I lean toward the latter, but I wouldn't short it right now. Luna: Fair. Let's zoom out a bit. This is episode 100 of China Economy with Fexingo, and we've covered a lot of ground over the past episodes. One thing that's been constant is how interconnected China's economy is with global trade, currency policy, and geopolitics. Lucas: Yeah, and that's the reason we started this show — to help people make sense of those connections. It's a complex topic, and it's easy to get lost in the noise. If you've found our conversations useful, and if walking through the economy with us has made something click, there's a simple way to support the show. Luna: Yeah, listener support is what keeps this podcast ad-free and independent. If you'd like to help, you can buy us a coffee at buy me a coffee dot com slash fexingo. It's a small gesture, but it genuinely helps us keep doing this. Lucas: And we really appreciate it. Now, back to the markets. We talked about the upside catalysts, but let's look at what could break this rally. The biggest risk is probably a sudden escalation in the Middle East. Oil at current levels is manageable, but if it spikes to $100 or higher, that changes the calculus for Beijing. Luna: And trade talks could fall apart. We've seen that movie before. Trump is saying he's 'not sure' he wants an Iran deal, which adds to the uncertainty. If trade talks get tied up with broader geopolitical tensions, it could derail the whole thing. Lucas: Right. The other factor is earnings season. Alibaba reports next week. If they miss, or if guidance is weak, that could puncture the rally. The stock is already pricing in a lot of good news. Luna: So the next few weeks are critical. We'll be watching the trade headlines, oil prices, and the yuan closely. Lucas: Absolutely. For now, the market is voting with its feet. Chinese tech is back in favor. But as always, it's a story that can turn on a dime. Thanks for joining us on episode 100. We'll be back tomorrow with more.