U.S.-China High-Level Talks Expected to Ignite A-Share Tech Rally

Anticipated U.S.-China High-Level Talks Ignite Tech Rally: Logic and Sustainability Behind Semiconductor ETFs Hitting Limits and the STAR 50 Index Reaching an All-Time High

On May 12, China’s A-share market witnessed a rare “hard-tech frenzy”: The China–South Korea Semiconductor ETF surged to its daily trading limit in the final minutes of trading, with turnover soaring to RMB 6.9 billion; the STAR 50 Index jumped 5.23% in a single day—its largest one-day gain ever—surpassing 1,480 points for the first time and setting a new record high for closing prices; total turnover across the Shanghai, Shenzhen, and Beijing stock exchanges exceeded RMB 3.5 trillion, ranking third in A-share history and up by over RMB 480 billion from the previous trading day. This explosive rally is no isolated event—it reflects the convergence of multiple structural forces: (1) heightened expectations of a temporary easing in U.S.-China relations centered on President Trump’s planned visit to China from May 13–15; (2) intensifying domestic policy support for China’s semiconductor industry; (3) a clearly upward-turning global memory-chip cycle; and (4) strategic reallocation of capital toward the thematic triad of “security + self-reliance + upgrading.” Together, these drivers have fueled a tech rally distinguished by both robust fundamentals and strong event-driven momentum.

Geopolitical Turning Point: Trump’s Visit Reshapes Market Risk Appetite

China’s Ministry of Foreign Affairs officially announced on May 11 that U.S. President Donald Trump will pay a state visit to China from May 13–15. Markets reacted swiftly and positively. Notably, in an interview aired on May 10, Trump stated unequivocally: “I’m very much looking forward to visiting China—I believe this trip will be truly remarkable.” Such language is exceptionally rare in recent high-level U.S.-China interactions and significantly dampens prior market concerns about accelerating technological decoupling. Market consensus is now shifting—from viewing confrontation as “inevitable and irreversible” to recognizing a new phase focused on “managing differences and pursuing selective cooperation.” In semiconductors specifically, potential breakthroughs are widely anticipated on issues including: relaxation of U.S. export controls on advanced-process equipment; enhanced collaboration on mature-process supply chains; and mutual recognition of AI computing infrastructure standards. This optimism is not baseless: Reuters recently reported that the U.S. Department of Commerce has launched an internal review of licensing procedures for certain mature-process equipment exports. Meanwhile, China’s supplementary document to the “14th Five-Year Plan for Digital Economy Development” explicitly emphasizes “promoting mutual recognition of key technical standards and piloting cross-border data flows.” A systemic decline in geopolitical risk premiums has directly reduced the uncertainty discount embedded in tech-stock valuations—providing critical safety margins for high-beta sectors.

Industry Cycle Upswing: Memory-Chip Recovery Forms the Strongest Fundamental Base

Beyond geopolitical catalysts, even firmer fundamental support comes from the semiconductor industry’s own cyclical turnaround. Prices for DRAM and NAND Flash memory chips—key indicators of sector health—have risen steadily since Q4 2023. According to the latest data from TrendForce, DRAM contract prices rose 13% quarter-on-quarter in Q1 2024, while NAND Flash prices surged 18%; momentum remains strong heading into Q2. This upswing is being driven by three converging forces: surging demand for high-bandwidth memory in AI servers (e.g., each NVIDIA H100 server requires over 2TB of memory); smartphone inventory restocking; and proactive capacity discipline by Samsung and SK Hynix. Capital markets reflect this strength: South Korea’s KOSPI Index soared 4.32% in a single day, hitting a record high and crossing 7,800 points for the first time—with SK Hynix surging 15% to become the global semiconductor sector’s top performer. On the A-share market, memory-related firms—including GigaDevice, Beijing JieLi, and Dongxi Semiconductor—also posted sharp, high-volume gains, confirming the classic transmission logic: “cycle leads, then design and equipment follow.” When industrial vitality aligns with policy tailwinds, tech stocks transcend mere theme-based speculation and acquire clear, earnings-validated growth trajectories.

Deepening Policy Support: Strategic Evolution from “Import Substitution” to “Ecosystem Co-Building”

Domestic policy support has likewise entered a new stage. Unlike earlier initiatives targeting discrete “bottleneck” technologies, current policy priorities have evolved toward building end-to-end industrial ecosystems. The Ministry of Industry and Information Technology’s (MIIT) “High-Quality Development Action Plan for the Semiconductor Industry (2024–2027),” released in April, introduces concrete measures for the first time—including establishing a national open-source EDA platform; launching a semiconductor-industry M&A fund with a target scale of RMB 100 billion; and opening GPU computing resources within government cloud platforms to support integrated training-and-inference validation for domestic AI chips. As the primary listing venue for hard-tech firms, the STAR Market continues to deliver institutional dividends: Starting in May, its newly implemented “STAR 50 Index Expansion Mechanism” will incorporate more niche-sector leaders, further tilting index weightings toward semiconductor equipment, materials, and advanced packaging. Policy signals and market behavior are now highly aligned—the semiconductor-related weighting in the STAR 50 Index has risen to 42.7%, far exceeding that of ChiNext (28.3%) and the CSI 300 (12.1%). This marks a decisive shift in capital allocation logic—from short-term thematic speculation to long-term “votes of confidence” in entire industrial ecosystems.

Transformation in Funding Structure: Institutional, Long-Term Allocation Has Begun

Behind the record-breaking RMB 3.5-trillion turnover lies a profound shift in funding composition. According to data from China Securities Depository and Clearing Corporation (CSDC), margin financing and securities lending (margin trading) balances surged by over RMB 28 billion on May 12 alone—with semiconductor and AI-computing-related positions accounting for 63% of that net inflow. Although northbound funds registered modest overall outflows, they added positions for core names—including SMIC and Cambricon—for three consecutive days. More importantly, long-term institutional investors—including social security funds and insurance companies—are accelerating their entry: the Huaxia STAR 50 ETF saw net subscriptions exceeding 4.2 billion shares in a single day, while the E Fund Semiconductor ETF’s share count rose 37% over just two weeks. Such participation signals a fundamental shift in market dynamics—from short-term event-driven trading to multi-year asset allocation grounded in structural industrial trends. With confirmation of the “policy bottom,” “industry bottom,” and “market bottom,” coupled with the critical 6–12-month window opened by Trump’s visit, the hard-tech theme has evolved from a tactical opportunity into a strategic imperative.

Conclusion: Three Key Anchors for Assessing the Rally’s Sustainability

The sustainability of this tech rally hinges on three critical variables remaining favorable:

1. Outcome of Trump’s Visit: Will the results exceed market expectations—particularly on substantive issues such as semiconductor equipment licensing approvals or frameworks for joint R&D?
2. Q2 Memory Pricing Momentum: Can DRAM and NAND Flash prices sustain quarter-on-quarter increases of over 10%, confirming the strength and durability of the cyclical upturn?
3. Deployment Pace of China’s Third-Phase National IC Fund: What is the actual disbursement speed and project execution efficiency of the RMB 100-billion fund?

So long as none of these variables undergoes a directional reversal, the semiconductor-centric hard-tech theme retains solid foundational support. When capital, industry, and policy synchronize within a shared strategic framework, the A-share tech sector’s valuation re-rating has only just begun.