ANALYSIS: China/US policy shifts to dominate markets in second half – experts

Speaking on a panel at the FOW Trading Asia event in Hong Kong last week, the executive director for Asia Pacific geopolitical risk at UBS pointed to US tariff policy rolled out in April and a politicisation of US monetary policy as key drivers.

“This year we have seen an incredible amount of geopolitical noise, and this has been an ongoing feature since 2016 – we have seen more every year with notable legs up in 2020 and this year 2025,” Marcus Bischoff, speaking in a personal capacity, said at the event. “I say geopolitical noise because the headlines don’t always translate into market volatility, much less an actual change in market positioning and this is borne out in the academic literature on this.

“Longitudinal studies have shown that, within three months of geopolitical events, markets are back to where they were before or even better as we have seen this year. That caveat notwithstanding I would argue we have seen two major geopolitical events this year.”

Jenny Wang, head of global business at Orient Futures, agreed US tariff policy has driven sentiment this year.

“In May, when the reciprocal China-US trade tariff talk eased, we saw pessimism in the market start to shift,” Wang said. “There were also expectations of further Chinese domestic fiscal policies, and commodities prices picked up as well as market risk appetite. In the third quarter this year, I think the special theme is also China, it’s not just the global geopolitical issues but also China government policies such as the anti-involution policy proposals which have caused a rally in coal and new energy prices.”

The Chinese last year began introducing “anti-involution” measures to soften the impact of internal competition on companies in its markets.

Bischoff added that outstanding uncertainty, such as the status of the US administration’s policy towards the American Depositary Receipt (ADR) market that allows trading of foreign securities by US investors, could determine strategic positioning.

“I think the main concern is surrounding financial decoupling,” he said. “We had a lot of market jitters earlier this year, when there were rumours about ADR divestment in the US. That’s a topic that is still playing in the background, and clients want to look at how they can position themselves around that.”

Also speaking on the panel, the general manager of Vector Capital Management pointed to efforts by the US to support dollar use. US legislators passed last month the Guiding and Establishing National Innovation for US Stablecoins (GENIUS) Act.

“I feel this year has been one of sovereign innovation in the asset markets as a result of geopolitical tensions,” William Fong said. “From the US point of view, there is a lot more regulation coming out and support for re-dollarisation. We have this stablecoin act coming through early last month, which supposedly pushes private as well as public stablecoin issuers to be able to channel a new multiplier of funds back into the US Treasury market, hence supporting the use of the dollar from the offshore market, on the blockchain and everywhere else.

Chinese authorities are separately expanding the use of the digital currency electronic payments system (e-CNY).

“On the other side of the pie, you have various initiatives coming from the Asian nations as well as the Gulf states. One example is the e-CNY which in the last few months signed an agreement to provide settlement infrastructure using a private blockchain - that is innovative from [other Chinese efforts] – for trade related settlement as well as in the future potentially financial products… As a result, what you will see in the coming months and years is a tug of war between both sides.”

Hong Kong’s Securities and Futures Commission is planning a consultation on the extension of transparency measures to listed derivatives two years after introducing the requirements for stock trading, its executive director said at the same event.