China Presses US to Lift Sanctions on Firms

The request comes as relations remain strained and policymakers on both sides are treating economic policy as a geopolitical tool. China has increasingly framed US sanctions as an obstacle to commercial normalisation, while Washington has used export controls and company blacklists to slow Beijing’s progress in strategic sectors. That makes any relief politically difficult, but also potentially valuable if it forms part of a broader deal.

Market reaction suggests investors are alert to that possibility, even if they are not yet pricing in a clean resolution. The FXI China large-cap ETF was trading at $35.34 on Sept. 3, below its 200-day moving average of $36.48 and just above its 50-day average of $34.67, a sign the market remains cautious. Alibaba shares were at $111.81, well under both its 50-day average of $115.80 and 200-day average of $134.75, while Tencent closed at HK$58.65 versus a 200-day average of HK$65.25. The technical backdrop points to investors still discounting a durable policy breakthrough.

That caution is reinforced by Adalytica’s China CCP Policy Direction Sentiment, which showed “Extreme Fear” at 4, even as its US-China Relations Sentiment improved to 70 from the prior day. In other words, the market sees dialogue, but not yet de-risking. For portfolio managers, that leaves Chinese equities vulnerable to abrupt swings: any sign of sanctions rollback could drive a relief rally, but failure to secure it would keep a valuation overhang in place.

The bull case is straightforward. If Washington signals even partial sanctions easing, it could improve confidence in Chinese corporate governance, reduce cost of capital pressure and support sectors exposed to imported software, equipment and financing. The bear case is that sanctions are now embedded in the strategic competition between the world’s two largest economies, making meaningful rollback unlikely outside a much broader political bargain. That would leave companies and investors waiting for incremental exemptions rather than structural change.

For now, the story is less about immediate policy action than about leverage. China is making clear that sanctions on its firms are no longer a side issue in bilateral talks; they are part of the core price of de-escalation. Investors will watch whether that posture produces exemptions, retaliation or another round of fragmented decoupling.