China: pro-growth stance realigns investment focus

China’s National People’s Congress (NPC) 2025 in early March reaffirmed the government’s commitment to pro-growth policies and, in turn, has stirred investor appetite.

The meeting set a GDP growth target of around 5% and announced measures aimed at bolstering consumption, technological innovation and financial stability.

With a headline fiscal deficit projected to be 4% of GDP, plus a significant expansion in special government bond issuance, the policy direction indicated an evolving landscape for asset allocation across equity and fixed income markets.

Equities: platform economy and AI to flourish

In the wake of the NPC, Bank of Singapore expects the Chinese equity markets to remain volatile and consolidate in the near term. Yet some specific opportunities are emerging.

For example, Premier Li Qiang’s emphasis on strengthening the platform economy has buoyed investor sentiment towards offshore Chinese equities, particularly internet and platform companies, which form a substantial portion of the MSCI China Index.

Further, the government’s commitment to AI development and supply-side reforms further strengthens the investment case for technology-focused stocks. And, in a bid to stabilise the real estate sector, investors might also look for exposure to select property stocks and real estate-linked sectors that could benefit from policy support.

However, geopolitical risks remain a potential drag, with ongoing US-China trade tensions adding an element of volatility. The latest tariffs and China’s countermeasures, including restrictions on US companies and products, are expected to keep market sentiment cautious.

As a result, according to analysis from Bank of Singapore, a barbell strategy, balancing defensive yield plays with growth sectors like AI and internet platforms, could be a prudent approach in the current environment.

Fixed income: tapping into increased bond issuance

China’s move to increase special government bond issuance to Rmb6.2 trillion ($854 billion) suggests a shift towards more aggressive fiscal support. This expansion could lead to higher government bond yields, presenting opportunities for investors in Chinese sovereign and policy bank bonds.

Additionally, with an expected Rmb500 billion allocated for bank recapitalisation, China’s financial sector is likely to see improved stability, making financial-sector bonds relatively attractive, added the Bank of Singapore report.

The slightly looser monetary policy stance also supports the case for fixed income allocations. While China has not pursued drastic rate cuts, a moderately accommodative policy environment could enhance the appeal of local currency bonds. However, global investors should remain vigilant about currency risks and potential capital flow fluctuations amid heightened geopolitical uncertainties.

Commodities and alternatives

The NPC’s plans to introduce Rmb300 billion in consumer goods trade-in subsidies signal strong government backing for domestic consumption, believes Bank of Singapore.

This could support sectors linked to consumer goods, particularly industrial metals, as China pushes for supply-side reforms and technological advancements in manufacturing.

Meanwhile, China’s growing emphasis on self-sufficiency in key sectors such as semiconductors and renewable energy suggests potential long-term opportunities in green infrastructure and high-tech manufacturing investments.