China against everyone: risky but stable

Trump is losing the war for capital

EUR/USD

Key zone: 1.1850 - 1.1950

Buy: 1.1950 (on strong positive fundamentals) ; target 1.2050-1.2150; StopLoss 1.1900

Sell: 1.1800 (on a confident breakout of the 1.1850 level) ; target 1.1650; StopLoss 1.1870

Over the past quarter, China has made serious concessions to the EU and the US, but there is still no truce in the tariff war.

Last week, Xi Jinping once again announced economic restructuring with a focus on domestic demand, although innovation remains the core element of the country’s development strategy.

The information about several Chinese companies being added to the Pentagon’s list as entities allegedly assisting the Chinese military caused confusion: the key companies on that list are actually the main buyers of Nvidia AI chips, whose deliveries were approved by Trump. The subsequent “super-fast” removal of this list from public access raises the question: what was that all about? And why?

Despite local bilateral agreements that Trump tries to present as his market victory, there has already been a steady capital outflow for six months (almost $110 billion in January alone) from China-focused domestic ETFs, and selling pressure continues to grow.

Reports that Chinese regulators instructed banks to limit investments in US Treasuries put new pressure on the dollar, once again raising concerns about a structural reallocation of funds away from American assets.

The call to get rid of US assets is gradually being implemented. Diversification of Chinese assets — both private and state-owned — away from US assets is only accelerating.

For example, China Investment Corporation (CIC) has started selling equities, as the monetary regulator intends to curb excessive speculation in AI-related stocks. Officially, only these assets have been announced so far, but real sales also affect other sectors sensitive to the US economy.

Reminder:

China Investment Corporation is the largest sovereign wealth fund of China, founded in 2007 to manage part of the country’s foreign exchange reserves and diversify investments.
This financial group has very strong ties to the state — it includes government funds and financial institutions and usually acts as a stabilizing force during market turmoil. This informal “cartel” controls assets equivalent to about 6% of the market capitalization of China’s A-shares, highlighting its ability to influence liquidity and market sentiment.
Historically, this group’s capital has acted as a buyer of ETFs and index products during periods of sharp volatility, including the Asian market crash of 2015 and the recent turbulence caused by tariffs.

Historically, this group’s capital has acted as a buyer of ETFs and index products during periods of sharp volatility, including the Asian market crash of 2015 and the recent turbulence caused by tariffs.

It is clear that the peak of selling has already passed, but Beijing’s overall approach to defending itself against US tariff pressure continues to make investors nervous.

For instance, the share of US dollar bonds in the external portfolios of Chinese banks has already declined noticeably in 2025.

So far, capital inflows into stock markets do not indicate a massive exit from the dollar. But if no positive developments appear soon in US–China relations, both the American and European stock markets may face a breakdown of traditional correlations and the emergence of new speculative bubbles across different segments.

Europe is already nervous, and unstable liquidity this week is provoking the unwinding of speculative positions beyond key trading ranges.

So we act wisely and avoid unnecessary risks.

Profits to y’all!