In September, China will announce new policies to encourage spending on services. This comes after recent data showed a slowdown in performance. The latest statistics reveal that industrial profits fell by 1.5% year-over-year in July, improving from a 4.3% decline the month before.

Shifting Government Focus

China’s upcoming policies to promote services consumption create a promising trading opportunity. This move makes sense considering the recent -1.5% drop in industrial profits in July. It highlights that the government is shifting its focus toward consumer-driven growth. The data aligns with trends we’ve noticed since late 2024. Although China’s official Services PMI was 53.5 in July 2025, indicating expansion, growth is slowing, and consumer confidence is fragile. The planned stimulus is essential not just due to one month’s poor data, but to maintain support for the main growth driver of the economy. In anticipation of the September announcement, we should invest in consumer-focused Chinese stocks. This could involve buying call options on tech giants and e-commerce companies listed on the Hang Seng Tech Index, or through ETFs like KWEB. Historically, similar announcements in 2023 and 2024 led to significant but often brief rallies in these stocks.

Market Strategy Implications

The implied volatility of these assets is already rising, signaling that the market is pricing in a policy change. By acting now, we can benefit from the expected announcement before the cost of volatility increases. This strategy allows us to take advantage of the government’s support initiative. On the other hand, the ongoing decline in industrial profits suggests a negative outlook for industrial commodities. This data implies that demand for materials such as iron ore and copper may stay low. We should maintain short positions in related futures contracts to protect our portfolio against the weaknesses of China’s traditional industries. The future of the yuan is uncertain, presenting an opportunity to trade currency volatility. A strong stimulus could strengthen the yuan, but if the announcement disappoints, the USD/CNH pair might rise. We can use option straddles on the currency to prepare for a significant move in either direction once the policy details are made public. Create your live VT Markets account and start trading now.

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