JPMorgan's Wendy Liu Sees Positive Impact of China's Overcapacity Curbing on Stocks and Global Trade

JPMorgan's Chief China Equity Strategist, Wendy Liu, believes that Chinese policies aimed at curbing excess capacity may positively impact equities and global trade. She sees a potential breakout from range-bound trading for Chinese stocks in the second half of the year. Liu emphasizes the importance of effective execution of these policies to achieve desired outcomes.

JPMorgan's Chief China Equity Strategist, Wendy Liu, believes that Chinese policies aimed at curbing excess capacity may positively impact equities and global trade. She sees a potential breakout from range-bound trading for Chinese stocks in the second half of the year. Liu emphasizes the importance of effective execution of these policies to achieve desired outcomes.

China's capacity utilization rate, currently at around 74%, trails behind the United States and the European Union. This excess capacity has been a primary driver of falling prices and intense, often margin-crushing, competition. By reining in this overcapacity, policies may effectively ease domestic deflationary pressures and allow leading companies to improve their profit margins [3].

The Chinese government has already pledged to tackle supply gluts in several key industries, including solar, steel, and cement. Solar glass makers have announced plans to cut their production by 30% starting in July, while steel mills have reportedly received official notices to lower their emissions and limit their output [3].

JPMorgan's strategists have identified several specific companies that may stand to benefit from the ongoing sector consolidation. These include mainland and Hong Kong-listed shares of prominent firms such as Contemporary Amperex Technology Co. (a leader in electric vehicle batteries), Baoshan Iron & Steel Co., Shanghai Putailai New Energy Technology Co. (a key supplier in the battery component space), Aluminum Corp of China, LB Group Co. (a major producer of titanium dioxide), and Hengli Petrochemical Co. [3].

The global forecast for the Asian markets is cloudy on lingering concerns over U.S. trade policy, with the European markets up and the U.S. bourses mixed and flat. The Shanghai Composite Index finished modestly higher on Tuesday following gains from the financial shares, property stocks, and resource companies [1].

The appointment of Fullgoal Asset Management to run a $50m Chinese equities mandate by Kirchliche Zusatzversorgungskasse des Verbandes der Diözesen Deutschlands (KZVK) reflects renewed investor interest in Chinese markets [2]. Improved market liquidity and rising international demand for Chinese assets have driven a rebound in Hong Kong’s IPO market, which ranked as the world’s leading fundraising venue in the first half of 2025 [2].

References:
[1] https://www.nasdaq.com/articles/profit-taking-may-dent-china-stock-market
[2] https://www.ipe.com/news/germanys-kzvk-appoints-fullgoal-to-manage-chinese-equities-mandate/10131481.article
[3] https://invezz.com/news/2025/07/09/chinas-push-to-end-oversupply-could-forge-a-new-class-of-market-champions-jpmorgan/
[4] https://www.bloomberg.com/news/articles/2025-07-09/jpmorgan-says-china-s-crackdown-on-overcapacity-may-boost-stocks