China aims to improve the teamwork between national and local government investment funds to support its strategic development goals. The National Development and Reform Commission (NDRC) has released draft guidelines for public feedback, focusing on how funds are allocated and assessed. The NDRC indicates that government-funded venture capital should concentrate on “new productive forces” to address technological challenges in key areas. National funds will support industries specified in official strategic catalogs, including those in the Catalogue of Industries for Encouraging Foreign Investment.

Boosting Modern Strategic Industries

The goal is to enhance modern strategic industries, making public investment align more closely with national economic objectives. These proposed changes are part of Beijing’s larger strategy to foster innovation, modernize industries, and achieve high-quality growth. The new draft guidelines provide a clear direction for government investment. We can expect more funding and policy backing for China’s high-tech and strategic manufacturing sectors. In the near future, derivative traders should focus on assets related to these areas, as they are likely to perform better. Traders should consider call options on ETFs that emphasize Chinese technology and innovation. For example, the Invesco China Technology ETF (CQQQ) and the KraneShares SSE STAR Market 50 Index ETF (KSTR) align well with the prioritized industries. The STAR 50 index faced a tough first half of 2025, dropping nearly 8%, but might see a rebound due to this targeted support. This initiative is reminiscent of the “Made in China 2025” plan from ten years ago, which led to a significant rally in sectors like robotics and electric vehicles. Historical trends suggest we can think about longer-term options, indicating that this is not just a short-term boost but the beginning of a prolonged policy effort. This hints at a trend that could extend into 2026.

Market Volatility and Strategic Changes

Implied volatility for options in these targeted sectors will likely increase in the coming weeks as the market processes this news. The CBOE China ETF Volatility Index (VCHIX) has been around a stable 28 but might climb to the mid-30s. This presents a chance for traders wanting to sell volatility or to buy options before they get pricier. On the flip side, this focused strategy may lead to less funding for older, traditional industries. Traders should consider protective put options on ETFs that heavily overlap with sectors not listed in the strategic catalogs, such as real estate or basic materials. The Global X MSCI China Real Estate ETF (CHIR) has not performed well this year and could face more challenges. The government is essentially highlighting favored industries, such as semiconductors, artificial intelligence, and green technology. In the upcoming weeks, our trading strategies should focus on these “new productive forces.” We will be monitoring for updates from the NDRC to get confirmation on the final details and timing of these investment changes. Create your live VT Markets account and start trading now.

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