Hong Kong stocks rise as trade agreement soothes fears on rare earths, chips
News Summary
Hong Kong stocks rose on Monday as US-China trade tensions eased following Beijing's announcement that it would suspend new export controls on rare earth metals and terminate investigations into US firms in the semiconductor supply chain. As of 9:50 am local time, the Hang Seng Index advanced 0.4% to 26,001.13, while the Hang Seng Tech Index fell 0.1%. On mainland China, the CSI 300 Index dropped 0.4%, and the Shanghai Composite Index lost 0.1%. Among the gainers, Trip.com Group rose 1.5%, JD.com added 0.9%, Xiaomi climbed 2.5%, and Li Ning gained 1.1%. PetroChina surged 2.9%, and CNOOC advanced 2.7%. Losers included Chow Tai Fook Jewellery Group, which slumped 6.6%, Zijin Mining, which lost 2.5%, and Semiconductor Manufacturing International (SMIC), which slipped 1.6%. The White House confirmed over the weekend that China would suspend additional export controls on rare earths and scrap investigations into US chip firms under a new trade framework agreed by US President Trump and his Chinese counterpart Xi Jinping, with Washington pausing some reciprocal tariffs in return. Two stocks debuted: Mininglamp Technology Group jumped 111% in Hong Kong, and Dynamiker Biotechnology Tianjin soared 472% in Beijing.
Background
Trade friction between the US and China has persisted for several years by 2025, particularly during Donald J. Trump's first term as President, where intense disagreements arose over tariffs, technology transfer, and intellectual property. Rare earth elements and semiconductors, as critical strategic materials and technologies, have consistently been flashpoints in the bilateral competition. Rare earths are a resource where China holds a dominant position, essential for high-tech industries, and China has previously threatened to leverage them as a bargaining chip in trade negotiations. Concurrently, the US has been actively working to curb China's rise in the semiconductor sector through export controls and technology bans to impede the development of Chinese chip manufacturers. Following President Trump's re-election in 2024, his administration's trade strategy and negotiation dynamics with China have been under close scrutiny. The recent agreement suggests that both sides may be seeking pragmatic solutions in key areas to alleviate global economic pressures stemming from supply chain disruptions and technology blockades.
In-Depth AI Insights
What are the strategic implications of this trade agreement for US-China tech rivalry beyond immediate market relief? This agreement suggests that despite long-term strategic competition, both nations are willing to engage in limited, pragmatic compromises in certain critical areas to avoid a full economic decoupling or significant supply chain disruptions. - The suspension of rare earth export controls provides short-term stability for global high-tech supply chains, reducing input cost uncertainties for US manufacturers. - Terminating investigations into US chip firms may aim to lower political risks for US companies operating in China and leave room for future, albeit highly restricted, technological collaboration. However, this does not imply a relaxation of the US's containment strategy regarding advanced semiconductor technology. How might President Trump's re-election and this agreement shape future US-China trade negotiations and the global supply chain landscape? Trump's re-election signals a continuation of "America First" principles in trade negotiations, but this agreement could set a precedent for more selective, "deal-oriented" negotiations, where concessions in specific areas are exchanged for reciprocal actions in others. - The nature of this being a "suspension" rather than a permanent cancellation means rare earths and chip investigations could still serve as future bargaining chips, leaving long-term supply chain stability uncertain. - Global supply chains are likely to continue evolving towards a "China+N" or "US+N" model, where companies diversify their supply chains beyond China and the US and its allies to mitigate geopolitical risks. - The deal may prompt other nations to reassess their positioning between the US and China, seeking greater self-sufficiency in critical technologies and resources. Despite the apparent de-escalation, what are the potential risks or hidden costs for either side? For the US, the short-term pause in tariffs and stable rare earth supply might be seen as a win, but in the long run, it could reduce the urgency to "de-risk" or reshore critical supply chains, leaving it strategically dependent on certain Chinese resources or markets. - For China, while suspending rare earth export controls eases external pressure, it might be perceived as a missed opportunity to fully leverage its rare earths as a strategic weapon, potentially facing stronger US containment in broader high-tech sectors like AI and quantum computing. - This "pause-for-pause" model, rather than a fundamental resolution of structural issues, means deep-seated contradictions persist, and future trade conflicts could re-escalate at any time, bringing sustained uncertainty for investors.