China’s Industrial Policy Could Spark Equity Breakout in Late 2025, Says JPMorgan

China’s latest industrial policy moves are beginning to influence equity markets, as strategists at JPMorgan note growing signals that the government is taking concrete steps to address long-standing overcapacity issues in key sectors.

According to a recent note from JPMorgan, Beijing has intensified efforts to reduce excess production—particularly in industries such as steel, cement, and electric vehicles—where supply has consistently outpaced demand. These measures, if sustained, could help restore pricing power, improve corporate margins, and reallocate resources toward higher-value sectors like semiconductors, renewable energy, and advanced manufacturing.

The bank’s strategists suggest that such structural adjustments could lay the foundation for a more stable earnings environment and potentially spark a breakout in Chinese equities in the second half of 2025. While recent months have seen lackluster performance in mainland and Hong Kong-listed stocks, signs of policy follow-through may act as a catalyst for renewed investor confidence.

Market participants are watching closely for any coordinated fiscal or monetary easing, alongside industrial restructuring. If combined, these factors may support a broader rally in Chinese stocks, especially those tied to strategic national priorities.

While risks remain—including weak domestic demand, deflationary pressures, and global trade uncertainty—JPMorgan maintains that China’s industrial policy shift could be a turning point for equity performance in Asia’s largest economy.