Latest / China Economy with Fexingo: Beijing's Policies, Trade, and Asia-Pacific Markets / China EV Stocks Are Splitting From the Yuan Again
Transcript
- Lucas: So here's a weird one. The yuan is essentially flat against the dollar this week — we're at 6.77 per dollar as of Friday — and broad China ETFs like the FXI are down about 1 percent over the past five days. Luna: Right, so the typical story would be: flat currency, flat market, nothing to see. But that's not what's happening. Lucas: Not at all. Because while the index is drifting lower, a handful of stocks are absolutely ripping. NIO is up 13.7 percent in the last five days. Baidu is up 4.4 percent. These are not small moves. Luna: And it's not just a China EV thing across the board — Pinduoduo is down almost 10 percent. JD is down 3 percent. So the market is really picking winners and losers. Lucas: Exactly. So the question is: what makes NIO and Baidu different right now? I think there are two separate stories here, and they're worth unpacking because they tell you something about how China's economy is actually evolving. Luna: Let's start with NIO. That's a 14 percent pop in a week — what's the catalyst? Lucas: So NIO announced a licensing deal with a European manufacturer — I can't name the exact partner because it hasn't been confirmed publicly, but the market is reacting to the strategy. Instead of trying to export cars into Europe and face tariffs, NIO is essentially licensing its platform technology to a local player. Think of it like how Arm licenses chip designs, but for EVs. Luna: That's a big shift. Because we've been talking for months about how Chinese EV makers are getting squeezed by European Union tariffs and slower demand at home. Lucas: Right. And the licensing model changes the math. NIO gets revenue without the logistics headache of shipping cars across the ocean, without building a factory in Europe, and without the tariff risk. The market is pricing that in as a de-risking event. Luna: But Baidu is a different story. That's not an EV company per se. Lucas: No, but its autonomous driving unit Apollo Go is. And that's what's moving the stock. Reports came out last week that Apollo Go's ride-hailing service in Wuhan and Beijing is now operating at a scale that's starting to matter — we're talking hundreds of thousands of trips per month, and the unit cost per mile is dropping fast. Luna: So the market is rewarding Baidu for something that's actually happening now, not just a promise. Lucas: Exactly. And this is the interesting divergence. The macro narrative about China — slowing growth, weak consumer, property sector still in recovery — that's all true. But within that, pockets of real innovation are breaking through. The market is starting to differentiate. Luna: Quick honest thing here — a handful of listeners chip in monthly through Buy Me a Coffee dot com slash fexingo, and that's what keeps this show ad-free and independent. Lucas: Yeah, it's a small group, but it genuinely makes a difference. If you've been following these China market divergences and finding them useful, that's where you can help. Luna: Right. And we don't run ads, we don't have sponsors — it's just listener support. So thanks to those who do. Anyway, back to the divergence — what does this mean for someone trying to invest in China right now? Lucas: I think the lesson is that broad China ETFs like FXI or MCHI are not capturing what's happening. They're heavily weighted toward state-owned enterprises, financials, and old-economy stocks. If you want exposure to the innovation story, you have to pick individual names. Luna: And that's harder, because it requires more research and more conviction. But the payoff can be significant. Lucas: Right. And the other thing to watch is whether the yuan stays flat. If the People's Bank of China lets it weaken further — and there's pressure because the trade surplus is shrinking despite record exports — that could change the calculus. A weaker yuan helps exporters but hurts companies that import components. Luna: So for NIO, which is licensing technology rather than exporting cars, a weaker yuan might actually be less relevant. But for Baidu, most of its revenue is domestic, so the currency move matters less. Lucas: Exactly. And that's why these stocks are moving independently of the macro. The market is pricing in company-specific catalysts, not just the China narrative. Luna: Alright, so to sum up: NIO is up on a licensing pivot, Baidu is up on autonomous driving scale, and the rest of the China market is basically flat to down. That's the divergence story of early June 2026. Lucas: And the question going forward is whether more Chinese companies can find these sorts of catalysts — or whether the macro headwinds eventually drag everything down. I'd bet on more divergence, not convergence. Luna: Good note to end on. Thanks, Lucas. Lucas: Thanks, Luna.