China has introduced a detailed plan to boost service consumption as its economic growth slows down. Nine major agencies, including the ministries of commerce and finance, developed this strategy. It aims to open up the internet, culture, telecommunications, healthcare, and education sectors to more foreign and private investments. The focus will especially be on mid- to high-end healthcare, leisure, and tourism.

Enhancing the Sports Economy

The plan also emphasizes developing the sports economy by hosting international events and competitions. Central government funds, along with local special bonds, will support infrastructure projects in culture, tourism, elderly care, childcare, and sports facilities. Banks will be encouraged to offer more credit to service-sector businesses using various monetary policy tools. This initiative addresses the sluggish growth in factory output and retail sales. Measures include interest subsidies for service industries and a substantial commitment of 231 billion yuan ($32.5 billion) in special treasury bonds aimed at consumer appliance and electronics trade-ins. The shift towards services comes in response to challenges like U.S. tariffs and an overall economic slowdown. China is focusing on boosting domestic demand, particularly in culture, healthcare, and tourism. While these areas could stabilize, ongoing weaknesses in factory output and retail sales indicate that there are persistent challenges ahead, suggesting the need for further stimulus actions. Since this stimulus is targeted, we should not anticipate a broad market rally but rather shifts into specific sectors. The weak data from August on factory and retail sales, showing year-over-year growth at only 2.8% and 2.1% respectively, could limit gains for major indices like the FTSE China A50. Traders might consider selling out-of-the-money call options on broad industrial ETFs to protect against continued economic weaknesses.

Opportunities in Domestic Services

This policy clearly benefits domestic services, creating chances in consumer discretionary and healthcare stocks. We recommend buying call options on companies in the tourism and leisure sectors, as they will directly benefit from government spending. For instance, options trading for major online travel agencies has already increased significantly on September 17th, indicating positive market sentiment. However, the persistent weakness in the industrial sector, highlighted by the Caixin Manufacturing PMI dropping to 49.2 in August 2025, remains a major concern. This contrast between support for service sectors and struggles in the industrial sector suggests a complicated situation. We believe that purchasing protective put options on ETFs tracking Chinese materials and heavy industry could be a wise way to manage risk. Looking at past stimulus efforts from 2023 and 2024, the market response was often immediate but short-lived. This time, the introduction of special treasury bonds for infrastructure looks promising, but we remain careful and will wait for a consistent rebound in consumer confidence. Increased volatility is likely as the market assesses whether these measures can effectively counteract the broader slowdown. The central bank’s approach, which avoids significant rate cuts, shows a preference for targeted credit expansion rather than broad monetary easing. This strategy should help stabilize the offshore yuan (CNH) around the 7.35 level against the dollar. We see a chance to sell CNH volatility, as the policy aims to promote growth without triggering large capital outflows. Create your live VT Markets account and start trading now.

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