By Tigris Asset Management | May 2025
In a coordinated move to boost domestic liquidity and stabilize market sentiment, the People’s Bank of China (PBoC)has announced sweeping easing measures just as top-level US-China trade talks are set to resume this week in Switzerland.
The moves are being interpreted as both a pre-emptive growth defense and a diplomatic overture — a dual signal that Beijing is ready to de-escalate, but not at the expense of economic momentum.
What Did the PBoC Announce?
At a rare joint press briefing with China’s financial regulators, Governor Pan Gongsheng unveiled the following:
PBoC Easing Measures:
- Reserve Requirement Ratio (RRR) cut by 50bps, releasing ¥1 trillion ($138.6B) in liquidity
- 7-day reverse repo rate cut by 10bps to 1.4%
- Loan Prime Rate (LPR) expected to fall in tandem
- Aim: boost interbank liquidity, reduce credit costs, and stabilize growth amid trade headwinds
The timing coincides with a confirmed meeting between Vice Premier He Lifeng and U.S. Treasury Secretary Scott Bessent, the first official trade dialogue since President Trump’s tariff escalation to 145% on Chinese imports, followed by China’s 125% retaliatory tariffs.
Market Reactions: What’s Moving?
1. Gold Rallies
XAU/USD surged +2.7% to $3,400, hitting a two-week high on a mix of:
- Safe haven flows from India-Pakistan tensions
- Concerns over Trump’s unpredictable tariff stance
- Resumed Chinese demand after holidays
2. USDJPY Drops Despite Higher US Yields
JPY gained on short-covering and rising Asia geopolitical risk, while AUDUSD reclaimed the 0.65 handle as risk sentiment improved.
3. Asian FX Stabilizing
- USDTWD recovered, with local buying support keeping it above 30.00
- CNH and CNY steady, supported by central bank bias for currency stability ahead of talks
Implications for Investors
1. Trade Thaw in Progress?
Markets are beginning to price in tariff moderation. Goldman Sachs now expects US tariffs on China to fall from 160% to 60% relatively soon, with China likely reciprocating.
Tigris View:
This trade reset, if real, could spark a rebound in battered Asian assets — but political uncertainty and tactical posturing mean risk assets may remain volatile short-term.
2. Monetary Divergence Widening
With China easing aggressively and the Fed likely to hold rates steady, global capital may continue rotating toward Asian risk assets, particularly:
- Short-duration private credit
- Local-currency sovereigns
- Defensive tech and infrastructure equities
3. Geopolitical Risk Cannot Be Ignored
The India-Pakistan standoff, centering around Kashmir and river water disputes, is intensifying. Markets could face fresh volatility if rhetoric escalates into military action.
Tigris Takeaway
We see this moment as a tactical inflection point:
- Positive risk catalysts: Easing liquidity, possible tariff reprieve, resumed trade dialogue
- Offset by elevated uncertainty: Geopolitics, Trump’s tariff unpredictability, US fiscal fragility
Our positioning:
- Overweight secured, short-duration private credit with real-time monitoring
- Neutral on gold after strong run — looking for re-entry < $3,350
- FX: Tactical long AUDUSD, cautious on USDJPY and USDINR amid Asia risk
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