The world's second-largest economy is feeling the effects of deflationary pressure from a property market that has been struggling since 2021 alongside weak consumer confidence. This in turn reveals its great dependence on exports, which is not necessarily beneficial in an increasingly tough global trade environment. The central bank is therefore opening the money tap in order to forestall a downward spiral of falling prices and consumption. The government is also helping with a range of measures aimed at winning back the trust of the population on the one hand and enabling it to play a leading role on the world market on the other.
Whether e-mobility, artificial intelligence or other high-tech sectors, China set itself the target years ago of achieving global technology leadership across many industries. To that end, the government is propping up carmakers, among others. And with success: state subsidies ensured that sales of vehicles with alternative drive technology (known as new energy vehicles, or NEVs) climbed 42% in August, accounting for a record 53.1% of total sales. That is cheering the stock market, with the shares of prominent carmakers such as BYD, Dongfeng and Geely recently hitting new highs for the year. The Stromer trio is also part of the Swissquote China’s Dragons Index. In all, the barometer contains 20 Chinese companies who have aligned their business to the ten key industries selected by the government. Alongside autonomous and renewable energy-driven vehicles, these include forward-facing information technologies, automated machine tools and robot technology, aviation and aerospace equipment, shipping equipment and high-tech transport, modern railway transport systems, electricity generation systems, agricultural machinery, new materials, biopharmaceuticals and innovative medical products.
While the carmaker trio mentioned above, along with Guangzhou and the supplier Zhongsheng, are responsible for about one fifth of the performance of the Swissquote China’s Dragons Index, internet groups also play a significant role. The prominent threesome of Alibaba, Baidu and Tencent account for a 16% share. Operationally, the companies are in forward gear at the moment. Amazon competitor Alibaba, for instance, has long been more than just an e-commerce provider. A few days ago, for example, the group announced that it was integrating its language modules into Nvidia’s Orin platform in order to supercharge autonomous driving and cloud computing services. These are two sectors in which the search engine giant Baidu plays an important role. Its success was reflected in the most recent quarterly figures: while advertising revenue slipped 2%, sales in the cloud grew by 14% from April to June, with generative AI contributing 9%. The pace is thus accelerating – growth was 6.9% in the first quarter. Baidu also partners with Geely to operate the automotive joint venture Jiyue, which has just announced that it will bring another electric model, the “Jiyue 07”, onto the market in China.
The absolute heavyweight in the Swissquote China’s Dragons Index is the Bank of China. As a lender, the bank is benefiting first of all from the measures taken by the central bank. By the end of the first half-year, loans to private businesses had already risen by 9.4% year on year to reach CNYbn 348. In addition, the financial services provided to 83,500 tech firms for technological innovation by the end of June passed the CNYbn 650 mark in total investment. It is not set in stone, however, that the Bank of China will continue to dominate the index in the future, as the barometer is reweighed every three months. The composition is also dynamic, with Swissquote constantly on the lookout for potential candidates. These must meet both qualitative and quantitative criteria, such as a market capitalisation of at least USDmn 100 and an average daily trading volume of USD 100,000. The management fee charged for the corresponding tracker on the Swissquote China’s Dragons Index is a modest 0.7% p.a. The sophisticated strategy instrument has recently turned sharply upwards along with the market and likewise reached a new high for the year.
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