China EV Boom and AI Surge: Why Hong Kong Stocks Are Outpacing Mainland Markets

US Tariffs Are Hurting the US, Not China

This week, the Organization for Economic Co-operation and Development (OECD) highlighted Mexico, the US, and Canada as the primary victims of a 10% rise in bilateral tariffs. In contrast, China’s economy is expected to face minimal fallout from these trade barriers.

The debate over which economy has more to lose from a trade war continues to intensify. Robin Brooks, Senior Fellow at the Brookings Institute, commented:

“While the US chops itself to bits in trade disputes with every country under the sun, China flies under the radar. Indeed, China’s global trade surplus in the first 2 months of 2025 is the biggest ever versus the same window in previous years. Tariffs on everyone mean China wins.”

US vs. China: Economic Divergence in Full Swing

On Wednesday, March 19, the FOMC projected GDP growth of 1.7% in 2025, down from the December forecast of 2.1%. The Fed’s forecast was more pessimistic than the Organization for Economic Co-operation and Development (OECD), which revised its 2025 forecast from 2.4% to 2.2%.

In contrast, China’s growth projections are improving. The OECD expects China’s economy to expand by 4.8% in 2025, up from 4.7%. This aligns with Beijing’s target of around 5%. In December 2024, S&P Global had projected that a 10% tariff on Chinese goods would slow China’s GDP growth to 4.1% in 2025.

Amid trade tensions, China’s AI and EV sectors continue to gain global market share. these developments position the nation as a leader in both industries.

China’s Electric Vehicle Industry Gains Momentum

Recent developments in China’s electric vehicle (EV) sector highlight its rising dominance. Jostein Hauge, assistant professor at the University of Cambridge commented on China’s rising dominance in the global auto industry, stating:

“In 1998, China accounted for 1.4% of global car production. In 2023, China accounted for 38.4% of global car production. We’ve never seen a country take over a global industry at such a rapid pace.”

Key players in China’s EV space continue to drive innovation and growth:

• BYD Company Ltd. (01211.HK): Announced a breakthrough 5-minute superfast charging technology and unveiled its God’s-Eye ADAS self-driving system. Shares are up 56.41% year-to-date (YTD).
• NIO Inc. (09866.HK): Reported record monthly deliveries in December, with 2024 deliveries rising 39% year-on-year (YoY). The share price has rallied 17.67% YTD.
• XIAOMI Corp. (01810.HK): Reportedly expanded the scale of its second electric vehicle production plant under construction in Beijing, underscoring robust demand. Xiaomi Corp has surged 68.7% YTD.

Other key players in China’s EV space include Geely Automobile Holdings Ltd. (00175.HK), up 21.32% YTD, and Li Auto Inc. (02015.HK), which has risen 15.7% YTD.

President Trump’s tariff policies come at a bad time for US car manufacturers dependent on the China market. US tariffs can drive nationalistic consumer behavior, potentially impacting demand for US cars.

General Motors (GM), heavily reliant on demand from China, has dropped 6.53% YTD, while Tesla Inc. (TSLA) is down a whopping 41.6% YTD.

China’s AI Developments Fuel Demand for Hong Kong-Listed Tech Stocks

China’s artificial intelligence (AI) advancements are also redrawing the global tech landscape. On Wednesday, March 19, Tencent Chairman Ma Huateng emphasized China’s AI progress, stating that:

“AI has significantly improved in intelligence compared to previous years. After careful consideration, Tencent has embraced DeepSeek in both its cloud business and Yuanbao. The opportunity for major developments in AI applications has arrived, with many companies adopting AI. The growth of AI agents and related tools holds great potential.”

Investors are taking note. Alibaba (09988) leads the charge, surging 69.9% YTD, while Baidu (09888) and Tencent (00700) have gained 17.05% and 29.62%, respectively. In contrast, Nvidia (NVDA) has fallen 12.49% YTD. Valuations have potentially driven investors to the Hong Kong market.

Hong Kong Markets Outpace Mainland China’s

Optimism surrounding China’s EV and AI sectors has put the Hang Seng Index in the driving seat. Brian Tycangco, editor/analyst at Stansberry Research, highlighted growing Mainland investor demand for Hong Kong-listed stocks, recently stating:

“A RECORD-BREAKING DAY for mainland China inflows into Hong Kong stocks via the StockConnect today 3/10 (Monday). This is major buying that could very well include state-owned funds, insurers, and retail investors. Do they know something is going to happen soon?”

Market trends reflect this shift. The Hang Seng Index has rallied 21.76% YTD, outperforming the CSI 300 (+1.56%) and Shanghai Composite Index (+1.96%).

Looking Ahead: Stimulus News and Tariff Risks

After Beijing’s recent stimulus pledges, fresh stimulus, targeting consumer consumption and domestic demand, could be the next market catalyst. The Hang Seng Index could potentially revisit the 30,000 level for the first time since February 2021.

However, HK and Mainland China remain vulnerable to an escalation in the US-China trade war.

Stay ahead of market trends—explore our latest analysis on China’s economy and global markets here.