China’s Politburo met on Friday and described the “14th five-year plan” period as “extremely unusual and extraordinary”. It said China’s economic, scientific and technological, and overall national strength have reached a new level.
The meeting called for more active macro policies and better forward-looking, targeted policy coordination. It reiterated the approach of seeking progress while maintaining stability, and said policy should be coordinated across domestic and external conditions.
Policy Priorities And Market Stability
It set out actions to deepen the unified national market and to prevent and resolve risks in key areas. It also called for expanding domestic demand, optimising supply, and developing new quality productive forces based on local conditions.
The Politburo said reform measures should be better coordinated with macro policy. It also pledged to speed up high-level scientific and technological self-reliance and self-improvement, and to increase efforts to protect and improve people’s livelihoods.
In market moves, AUD/USD was near 0.7128 at the time of writing, up 0.24% on the day.
The statements reaffirm a commitment to macro-policy support, which should dampen volatility in Chinese equity markets. Given that the Caixin Manufacturing PMI for January 2026 recently beat expectations by printing at 51.2, we see a basis for selling out-of-the-money puts on broad indices like the FTSE A50 or the Hang Seng. This strategy benefits from both a stable to rising market and a decrease in implied volatility.
Commodities And Currency Implications
This pro-growth and domestic demand focus is bullish for industrial commodities and, by extension, commodity currencies. The Australian dollar’s reaction is a key tell, as iron ore prices on the Dalian exchange have already climbed 8% this past month to over $135 a tonne. We should consider buying AUD/USD call options to capitalize on further strength as stimulus measures filter through the Chinese economy.
The emphasis on “new quality productive forces” and technological self-reliance points towards continued support for specific sectors. After a difficult 2025, the Hang Seng Tech Index has already shown signs of life, rising 12% year-to-date. We see an opportunity in call spreads on technology-focused ETFs to play this theme of targeted government backing.
We should, however, remain mindful of the pledge to resolve risks, especially after the property sector’s persistent weakness throughout 2025. This suggests that while the overall market may be supported, specific over-leveraged companies could still face headwinds. A pair trade, going long a broad market index future while buying puts on a vulnerable real estate developer, could be a prudent hedge.
Looking back at the policy responses of late 2025, the government showed a preference for gradual, targeted support rather than overwhelming stimulus. This suggests that strategies expecting a slow and steady appreciation are more likely to succeed than those betting on a sudden, explosive rally. Therefore, selling put spreads offers a more favorable risk-reward profile than buying outright calls for the coming weeks.
