In May, China’s equity markets marked a month of recovery, regaining much of the ground lost following the sharp imposition of Trump-era tariffs around Liberation Day. The MSCI China , the MSCI China All Shares and the MSCI China A Onshore indices gained 2.38%, 2.45% and 2.54% respectively over the month. A key turning point came after a weekend meeting between US and Chinese officials in Geneva, which resulted in the effective tariff rate falling from 145% to 41%. Although the Trump administration maintains that its tariff policies are deliberate and part of a broader negotiation strategy by President Trump, the unintended consequence has been a faster realignment in global trade and driving traditional allies closer to China.

Investor sentiment improved as macroeconomic concerns eased. Equity markets rebounded, particularly across growth sectors such as new consumer, clean energy, healthcare, and technology. In contrast, defensives like utilities delivered more muted performance while stimulus-sensitive sectors, including real estate, building materials, coal, steel, and home appliances, lagged the broader market due to fading expectations of further policy easing.

Progress in US-China trade talks appeared to temper the pace of domestic stimulus. On 7 May, the People’s Bank of China (PBOC) made modest policy adjustments, cutting the required reserve ratio (RRR) by 50 basis points and the prime lending rate by 10 basis points – injecting an estimated RMB 1 trillion into the financial system. In addition, lending rates for the housing provident fund were lowered by 25 basis points to ease the burden on homebuyers. At the same time, Q1 GDP growth came in stronger than expected at 5.4%, and corporate earnings showed signs of recovery, with A-share listed companies posting a net profit growth rebound of 5%-10%, reinforcing a more stable outlook and supporting market confidence.