China pauses corporate investment approvals in the U.S. amid rising trade tensions
by VT Markets
/
Aug 1, 2025
Impact on Market Volatility and Investment Sectors
Since China stopped approving U.S. investments in April 2025, we expect a sharp increase in market volatility. Derivative traders should monitor the CBOE Volatility Index (VIX), which rose over 20 during similar trade tensions in 2019. This indicates that option prices will likely go up, making volatility-based strategies like long straddles more appealing.
We’re focusing on sectors such as technology, electric vehicles, and manufacturing, which will feel the immediate effects of this investment freeze. Chinese foreign direct investment in the U.S. has already dropped from over $45 billion in 2016 to just $4.7 billion by the end of 2023. This new policy will further restrict capital flow. We see a chance to buy put options on specific sector ETFs like the Invesco QQQ Trust (QQQ) or the Industrial Select Sector SPDR Fund (XLI).
Currency Market Dynamics
The currency market is likely to experience significant activity, especially with the offshore yuan (CNH). During the peak of the trade war in August 2019, the USD/CNH exchange rate crossed the important level of 7.0 due to similar pressures. Now, we’re on the lookout for a potential retest of those highs, which could create opportunities in currency futures and options for those betting on a weaker yuan.
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by VT Markets
Aug 1, 2025
Insights 
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