China-focused investors are increasingly looking beyond trade tensions ahead of a meeting between US President Donald Trump and Chinese President Xi Jinping in Beijing, with market attention now centred on artificial intelligence growth and potential changes to US chip export restrictions.
The shift marks a sharp contrast from previous years, when Chinese asset prices moved aggressively on tariff and trade headlines.
The change in sentiment has been reflected most clearly in the yuan, which has steadily strengthened over the past year and recently reached a three-year high.
Although investors acknowledge that difficult issues such as the US-Israeli conflict with Iran, Taiwan, rare earths, and nuclear weapons could weigh on sentiment, many market participants are currently prioritising China’s technology ambitions.
AI boom drives investor confidence
China’s benchmark Shanghai Composite is trading at an 11-year high, supported by strong export growth fuelled by AI-related demand.
Investors appear less concerned about a widening trade surplus or the possibility of renewed US tariffs, with many instead backing China’s push towards artificial intelligence self-sufficiency.
Trump is scheduled to visit China on Wednesday in what will be his first trip to the country in nearly nine years.
Investors believe the relationship between Washington and Beijing has become less confrontational since Trump and Xi agreed to pause their trade war six months ago.
US courts have also struck down much of Trump’s initial tariff measures, while trade data indicates Chinese goods are still reaching the US market through Southeast Asia.
At the same time, the fallout from the Iran conflict has strengthened China’s efforts to secure supply chains, encouraging investors to view geopolitical tensions as a driver for domestic technological development.
Stronger yuan reflects changing market dynamics
During Trump’s first term and the beginning of his second, the yuan often acted as a barometer for US-China relations.
However, since tariff tensions intensified in April 2025, the Chinese currency has been driven higher by robust exports and expectations that Chinese authorities are comfortable with a stronger yuan despite volatility in the US dollar.
Analysts at Goldman Sachs said the summit could support further gains in the Chinese currency.
“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.
The analysts added that the case for a stronger yuan appeared “more fundamental and longer-lasting beyond this week’s events” as China’s external surplus continued to support the currency. Goldman Sachs expects the yuan to strengthen to 6.5 per dollar over the next 12 months.
The yuan touched a three-year high of 6.79 against the dollar on Monday and remained close to that level on Tuesday.
Investors are also watching closely for any developments involving advanced chip exports to China.
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