June ninth, two thousand twenty-five

I. Foundation 

resistance to change and hence greater dependability for the results shown in the past.

II. Insights 

Our Viewpoints and ideas on market...

Focus on London: Technical Concessions Rather Than a Directional Deal (Examining the Decision-Making Perspective)

The next key event shaping the direction of risk-on trading is the outcome of the U.S.-China talks now taking place in London... It is worth pointing out that the beta of trade-war headlines has fallen significantly. The market largely no longer believes in so-called deals or threats, or in whether today's tariff levels will remain unchanged next month. This is highly consistent with the negotiating path we mentioned earlier:The beta of trade-war headlines has fallen significantly. The market largely no longer believes in so-called deals or threats, or in whether today's tariff levels will remain unchanged next month. This is highly consistent with the negotiating path we mentioned earlier:

Figure: Notes 250509 before the trade negotiations

The harsh reality is that trade negotiations often involve a long and repeated back-and-forth, while the market has no patience to sit through the whole process.As a result, whether the news is a ceasefire, a pause, a reversal, or a policy turnaround, it is now seen as temporary and subject to change at any time, and the market reaction is no longer as intense as it was in recent months.

From the perspective of decision-makers in both the East and the West, this London meeting is also very different from the one a month ago...

1) Given that the S&P 500 index has returned to near its highs and volatility in U.S. Treasuries has eased, it is no surprise that the United States has the confidence to take a relatively tough stance.(In a highly market-oriented system, market outcomes are a key reference point for U.S. decision-making.)。

2) The May data are crucial because they reflect conditions under significant tariff uncertainty. China's exports in May continued to show exceptional resilience, still recording year-over-year growth of 4.8% despite the high base from last year, This means there is no urgent pressure to reach a deal with the United States or stimulate the economy, Compared with a major directional deal, the likelihood of reaching a limited, transactional agreement has increased, and decision-makers can indeed make only cautious concessions.

Figure: Although exports to the United States fell further and sharply, exports to other countries grew, so the total still increased

Figure: Strong non-U.S. trade makes sense of U.S. demand

Behind the strong exports, This means second-quarter GDP growth has been secured (actual GDP growth in the second quarter will likely exceed 5%, and the third quarter will also benefit from a low base). This is the fundamental source of confidence....

We also share the reasoning behind this analysis in this article. In fact, over the decades since reform and opening up began, it has been a top-down decision-making system that sets the framework for the actions of the entire decision-making apparatus, Whether it is the finance ministry, the central bank, or the trade authorities, the fundamental constraint on all actions is the operating framework set by the growth target.

Last year, we bet on the “had no choice but to” scenario if the target were missed, and in the end, the payoff was fairly good. This year, the same framework will also constrain what they do not do. Meeting the target is paramount; neither too much nor too little is best, and those working within the system should understand what we mean. Exceeding the target is not necessarily a good thing. If someone stands out as having pushed too hard and something goes wrong, accountability will be pursued to the end.

This also means we have no expectations for any adjustment before the third quarter from the 7-month meeting or from what the market is betting on,

Let us make this clear once again.

Finally, returning to the title, Compared with a directional deal, a technical concession is far more likely to be the outcome—for example, a simple, symbolic concession on rare-earth exports (China controls roughly 70% to 90% of the world's key rare-earth resources, giving it greater bargaining power in negotiations, so rare-earth materials are one aspect), in exchange for easing controls (concessions on chip controls, with advanced technology being another aspect) or tariff relief (the U.S. side may make concessions on fentanyl tariffs)...

The other possibilities are unlikely.

2025.06.09

III. Market Pulse 

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Note: All content in this article is for reference only and does not constitute investment advice or serve as a basis for any laws, regulations, or regulatory policies. Investors should not use or rely on this information as a basis for their decisions.