Insights 
VT 
China’s GDP growth for the third quarter of 2025 was 4.8% year-on-year, matching market expectations. However, disparities in growth have raised concerns about a potential slowdown as industrial production and exports begin to decrease.
Final consumption and net exports of goods and services maintained their contributions at 2.7 points and 1.2 points, respectively. Gross capital formation dropped to 0.9 points from 1.3 points in the previous quarter, suggesting a cautious investment environment.
China’s Expected GDP Growth
China’s GDP is expected to grow by 5.0% in 2025, with a required growth rate of 4.5% in the fourth quarter. The impact of US tariffs is expected to affect growth in 2026, with forecasts maintained at 4.2%.
The 1-year and 5-year Loan Prime Rates remained unchanged in October. The People’s Bank of China (PBOC) plans to keep monetary policy accommodating, maintaining liquidity to support government bonds and markets. With US Fed rate cuts on the horizon and domestic deflation pressures, the PBOC may cut interest rates by 10 basis points later in the year, and a 50-basis-point cut to banks’ reserve requirement ratio could be forthcoming.
Discussions regarding the 15th five-year plan will take place at the Fourth Plenum, with announcements expected at the National People’s Congress in March 2026.
Given the mixed economic signals from China as of today, October 21st, 2025, we see a clear case for strategic derivative plays. The headline GDP figure masks underlying weakness, particularly as September’s industrial production growth slowed to 4.1%, the lowest figure we’ve seen since the brief reopening surge in early 2024. This cooling, combined with exports contracting by 1.5% last month, suggests options strategies that bet against industrial-linked assets may be prudent.
Monetary Policy and Currency Considerations
The People’s Bank of China is expected to maintain an accommodative policy, which points toward currency weakness. With the central bank poised to cut rates later this year, we anticipate further downward pressure on the yuan, with the USD/CNH pair likely to test the 7.40 level in the coming weeks. Traders should consider buying call options on USD/CNH or establishing forward positions to capitalize on this expected depreciation.
This week is critical due to the Fourth Plenum, which concludes on Thursday and will create short-term uncertainty. We have seen implied volatility on Hang Seng Tech Index options tick up to a three-month high of 35% ahead of the event. This environment is ideal for volatility-based strategies like purchasing straddles or strangles on key Chinese equity ETFs, which would profit from a significant market move in either direction following policy announcements.
The expectation of monetary easing in China is further supported by policy moves abroad. The CME FedWatch tool is now pricing in a 75% probability of a 25-basis-point rate cut by the US Federal Reserve at its December 2025 meeting. This global easing trend provides the PBoC with more room to act without triggering excessive capital outflows, reinforcing our bearish view on the yuan for the remainder of the year.
While the broader economic picture is slowing, the combination of expected PBoC liquidity injections and a policy focus on consumption could favor domestic equities. We are seeing early signs of divergence, where the domestic A-share market may outperform against a weakening currency. Therefore, traders could structure positions that are long China A50 index futures while simultaneously holding short CNH exposure.
