Investors say they want Trump and Xi to stay out of AI's way
This is in stark contrast with years of Chinese asset prices swinging wildly on trade and tariff headlines and is reflected most clearly in the yuan, which has been steadily rising for a year to reach a three-year peak.
Highlights:
- Yuan at 3-year top, stocks at decade high into US-China meeting
- Investors see US-China relations stable
- Market focus on AI supply chain, not trade
Investors expect US President Donald Trump and his Chinese counterpart to keep trade tensions on the backburner when they meet in Beijing and say they are focused on the booming AI sector and whether the US will relax chip export restrictions.
This is in stark contrast with years of Chinese asset prices swinging wildly on trade and tariff headlines and is reflected most clearly in the yuan, which has been steadily rising for a year to reach a three-year peak.
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While thorny subjects like the US-Israeli war on Iran, Taiwan, rare earths and nuclear weapons may be discussed and major disagreements could dent market confidence, investors are presently betting on China's technology drive.
China's benchmark Shanghai Composite is trading at an 11-year high and export growth is powering ahead on a wave of AI-driven orders. Even a widening trade surplus does not make fund managers nervous about a fresh round of US tariffs and they have swung their portfolios behind China's artificial intelligence self-sufficiency drive.
"The tables have turned. There's little China is eager to discuss with Trump," said Yang Tingwu, vice general manager of Tongheng Investment, adding that Trump's unresolved war with Iran has weakened his hand. Yang has invested in China Mobile and China Telecom for exposure to their data-centre businesses.
The shift in market focus, with Trump due on Wednesday for his first visit to China in nearly nine years, reflects the diminished brinkmanship in the US-China relationship since Trump and President Xi Jinping pressed pause on their trade war six months ago.
US courts have struck down much of Trump's initial tariff barriers. Trade data suggests Chinese goods are reaching the US anyway via Southeast Asia.
And as the fallout from the Iran war strengthens China's push to shore up its supply chains, investors have also priced in US-China tension and bet on it spurring China's technology development.
"China has made great strides in technology, grown the new economy, expanded its global clout and increased its leverage in the global power rivalry," said Wen Xunneng, founder and CEO of Zhu Liu Asset Management.
He has been investing in AI infrastructure and expects US-China relations to be stable at least until Xi makes an expected reciprocal visit to the US.
"After Xi's visit to the US, the two countries may enter the next stage of rivalry, but now it's a relatively peaceful time," he said.
Rising Yuan tells the story
During Trump's first term and at the outset of his second, the yuan traded as a barometer of the bilateral relationship.
Since the tariff storm was unleashed in April 2025, however, the yuan has been guided higher by booming exports and a belief in the market that authorities are comfortable with a stronger currency that is in contrast with a volatile dollar.
"The summit could be a tactical catalyst for CNY strength and an important marker in stabilising trade relations," Goldman Sachs analysts said in a note.
"(But) we think the case for a stronger CNY is more fundamental and longer-lasting beyond this week's events," they said, as China's external surplus drives the currency to a 12-month forecast of 6.5 to the dollar.
The yuan hit a three-year high of 6.79 to the dollar on Monday and traded near that level on Tuesday.
The expected attendance of top US business leaders at the summit has also raised hopes for deals spanning finance, agriculture, energy and aeroplanes, while some investors see an opportunity for China to push for peace in the Middle East.
"I'm hoping that maybe Trump can get Xi to put pressure on Iran to get the Strait of Hormuz open again and the oil flowing," said Jack Ablin, chief investment strategist at Cresset Wealth Advisors.
But with expectations for a big announcement low, the fallback for most traders is to watch what has been moving markets and that has been the global AI boom.
Zeng Wanping, fund manager of Beijing Monolith Fund Management, said he is interested mainly in whether the US will allow more advanced Nvidia chips to be sold in China, which will pressure local producers.
"The only thing worth monitoring is development around AI," he said. "This is the market's top focus, no other."
