
China, Vietnam and Hong Kong may spring surprises in 2025

Summary
- Global eyes will turn east for good reason. Under watch will be Hong Kong tycoons, China’s recovery attempt, Chinese business ambitions (and luxury demand) and the impact of Trump’s policies on ‘plus one’ exporter Vietnam.
From China’s stock rout to the unwind of the yen-funded carry trade, whose participants, according to some, “eat like a bird and poop like a cow," 2024 was full of surprises.
No one expects 2025 to be less exciting. Here are five unlikely-but-not-improbable events that you might want to consider.
Also read: China starves its economy of information at its own risk
Hong Kong property tycoon’s debt workout: Its billionaire families are losing their prestige as a property downturn persists. The question is whether its tycoons will support their listed subsidiaries. Will they use some of the billions earned in the past to make investors whole?
The Cheng family’s New World Development, which has about $4.5 billion of perpetual bonds outstanding, is in the spotlight. Investors are worried the indebted developer may not call its 6.15% notes next June, or worse, defer all coupon payments.
While it’s well within New World’s right not to exercise the call, a decision not to repay creditors will send shockwaves across Hong Kong’s financial circles. Bankers will get nervous, rumours of a debt restructuring at New World will linger on trading floors, and smaller developers will feel the spillover.
Luckin Coffee’s return to Nasdaq: After admitting to accounting fraud and being kicked out of the Nasdaq in 2020, Luckin is roaring back as China’s biggest coffee chain. Starbucks is reportedly exploring strategic options in the country, including an outright sale, while Luckin readies itself to enter the US.
Will the company re-list in New York? Its senior management would like to if capital markets are willing to listen to a redemption story. An IPO will revive US investors’ interest in Chinese consumer firms.
But it will ignite discussions on how competitive America’s restaurant chains and retailers are, as China’s most disruptive businesses, like e-com marketplace Temu and Luckin, look to make money in the US. Watch out, Starbucks and McDonald’s.
Also read: Vietnam won big in Donald Trump’s first trade war. Now, it’s a target.
China’s century bonds: More than 100 years into its existence, the Communist Party believes it will be around for at least another century. To stimulate the economy, Beijing has been relying on ultra-long treasury bond issues to circumvent a self-imposed debt ceiling. In June, Beijing issued $4.8 billion worth of 50-year bonds at an interest rate of 2.53%.
How about offering century bonds? Those borrowings were trendy when deflationary pressures persisted in the euro zone. In 2020, Austria managed to raise €2 billion, paying only 0.85% coupon, a sign of how desperate investors were to buy high-quality notes that yield something. Macro backdrops in China are similar now.
The benchmark 10-year government bond yield keeps on testing new lows as sluggish economic data and central bank rate cuts push investors further out along the yield curve. An appetite for Chinese century bonds exists. And there’s little chance of a default.
The ‘great state of Vietnam’: US President-elect Donald Trump has been going after Canada, asking why the US provides its northern neighbour subsidies.
He even suggested it should become the 51st state, dismissively calling the sovereign nation “The Great State of Canada." As the protectionist Trump takes office in January, he might punish Vietnam, which now ranks third on trade surpluses with the US, behind only China and Mexico.
Since Trump started his trade war in 2018, global manufacturers, including many Chinese firms, have been diversifying their supply chains to Vietnam. Money has been going to the capital Hanoi and the eastern port of Haiphong. Quang Ninh was its largest recipient of FDI last year.
What’ll happen if Trump starts accusing China of using Vietnam as its 24th province? Last year, Vietnam’s trade surplus with the US hit $104 billion, up from $38 billion in 2017. You don’t want to be China’s plus-one when Trump is back in the White House.
Also read: How Beijing took control of Hong Kong’s financial hub—and left the West behind
European luxury is cool again: China, the world’s largest luxury market, has not been kind to European fashion houses this year. A prolonged property downturn as well as consumers’ value-for-money and mix-and-match mentality have contributed to weaker sales at the likes of LVMH Moet Hennessy Louis Vuitton and Gucci parent Kering SA. But make no mistake: There are millions of mini-millionaires; they just choose not to spend yet.
Next year, the wealth effect and the currency factor may just align, prompting them to favour European luxury items again. China’s wealthy are starting to recover after three years of losses from the property crisis and stock market routs. Meanwhile, the euro might just extend its downward spiral in 2025. A weaker euro can blunt the annual price hikes of luxury brands.
That’s all, folks! ©Bloomberg