All eyes are set on China this week, bolstered by a Shanghai Stock Exchange that has returned to peaks not seen in 11 years. For Western investors, however, deciphering the Chinese market remains a complex exercise.

The system is built on a major distinction between two types of securities. A-shares, denominated in yuan, are primarily reserved for local investors. Conversely, B-shares are quoted in foreign currencies to attract international capital. Previously, Chinese authorities devoted significant energy to promoting B-shares to draw in more foreign capital. However, in recent quarters, Beijing has tended to refocus on A-shares to develop domestic investment and strengthen companies with deep local roots.

The Chinese financial landscape is structured around three strongholds with well-defined roles. Hong Kong acts as an international hub and a gateway to the outside world. It operates outside Beijing's strictest capital controls, enabling global firms to establish a presence there. Shenzhen is asserting itself as the country's technological heart. Often compared to Silicon Valley, the city is home to innovation champions such as automaker BYD or home appliance giant Midea. Finally, Shanghai remains the state pillar where the heart of the traditional economy beats. It hosts the behemoths of energy, finance, and heavy industry, closely supported by the central government.

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The Shanghai Composite at its highest since 2015

The Shanghai Composite Index has a clear structure: it aggregates all companies listed on the Shanghai Stock Exchange, representing over 2,000 stocks. This Tuesday, May 12, it crossed a symbolic milestone by closing at 4,214.489 points, a level not explored since the summer of 2015.

(Performance of the Shanghai Composite since 01/01/2010)

This momentum is explained by the vigorous recovery of Chinese exports in April, stimulated by global appetite for infrastructure related to artificial intelligence. According to a note from CITIC Securities, China's competitive advantage in production costs is widening, which should sustain this bullish cycle.

Yet, a paradox is emerging: while the country relies on its price-competitiveness, the Producer Price Index (PPI) exceeded forecasts in April. According to Reuters, it has reached its highest level in 45 months. This signals both a rise in inflationary pressures at the factory gate and a return to production.

A nationwide trend?

The movement extends beyond Shanghai's borders. For several weeks, all Chinese financial centers have shown insolent health.

Since April 1, the numbers have been surging: Hong Kong's Hang Seng is up more than 6%, while the CSI 300, a true national barometer comparable to the S&P 500, has climbed nearly 10%. The CSOP Star 50, dedicated to high technology, posted the most spectacular performance with a 26% jump in April and already more than 10% in May, returning to its 2021 peaks.

(Shanghai Composite, CSI 300, Hong Kong Hang Seng, and CSOP Star 50, performance since 01/01/2025)

This improvement is mainly based on modern technologies: semiconductors, AI, and electric vehicles. However, this rally masks a major imbalance. Growth is driven almost exclusively by exports. Conversely, domestic consumption is stagnating, hampered by inflation that is rising again as instability in the Middle East becomes protracted.

Xi-Trump Summit

In this context, investors have their eyes fixed on the upcoming summit meeting between Xi Jinping and Donald Trump. Three critical issues will dominate the discussions:

  • Iran: China depends on Tehran for 80% of its oil supply.
  • Taiwan: The issue of American arms deliveries remains a major point of friction.
  • Artificial Intelligence: A matter of technological sovereignty for both powers.

This face-to-face will set the tone for Sino-American relations for the months to come and will determine whether the current market trajectory is sustainable.