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The predictions for the wider asset management, insurance and investment market for institutional investors in Asia are dominated by theories around the economic changes in China and what the new policies of Donald Trump’s administration will mean.
US-headquartered Law firm Ropes & Gray asset management partners Vincent Ip, Chune Loong Lum, and counsel Billy Zhang (based in Hong Kong and Singapore) have outlined the key trends and issues that they expect Asia-focused asset managers to have on their radar in 2025.
The predictions come in a new report where they specified that “The anticipated intensification of trade tensions and friction between the US and China is a topic of significant concern for all asset managers, but particularly for those with investments and operations in Asia”.
“The uncertainty surrounding President Trump's policies and their potential impact on global trade, investment and geopolitical stability is front and centre of discussions,” they said.
Much of Trump’s new tariffs and other economic policies could affect China’s economic recovery from the post Covid-19 malaise it’s been in for several years, which, they predicted, would be a major story of the year.
“The view that Chinese portfolio companies and the capital markets have found
their floors...may impact global asset allocations by asset owners"
“For asset managers with an eye on China, the trajectory of the country’s economic recovery is a critical factor to monitor,” they said. The trio added that this includes the policies of the Chinese government to support economic recovery, the restructuring of certain industries, and other internal factors that will have significant implications for investment strategies within the country.
“With China’s slowdown gradually easing and the view from some that Chinese portfolio companies and the capital markets have found their floors, this may impact global asset allocations by asset owners in terms of reassessing when the time is ripe to deploy in China in a more meaningful way,” they said.
Last year, the world’s second-largest economy had no shortage of bad news - from the endless Evergrande saga and its flow-on effects to the rest of the structural issues in China’s real estate sector, to US trade spats and reshoring trends, as well as the demographic time bomb that has become front and centre as the country’s population begins to fall.
“Sentiment [on China] has suffered,” said Marcus Weyerer, CFA, Senior ETF Investment Strategist, EMEA, at Franklin Templeton at the time, but he did say it was improving. “It’s been relatively poorly performing, and US investors are wary – but European investors are not quite so nervous but still slow.”
The changes in China could also be affected by Trump’s return to power. In December 2024, Zurich Insurance released a report that detailed “Proposed tariffs on imports are expected to rise but not fully [be] implemented to avoid disruptions,” under the new US administration and affirmed this was having an effect already. There were also still many with a watchful eye to see what would happen. “This uncertainty, coupled with geopolitical tensions, may negatively impact business investment and activity, leading to modestly weaker global growth in 2025,” said Zurich’s “Global Economic and Markets Outlook 2025” report. However, a global recession is not anticipated due to policy easing in Europe and support measures in China.”
China’s economy grew at a rate of 5% in the first half of 2024, said the World Bank, which it said was “robust”. This was supported by consumer spending on services, exports, and investment in manufacturing and public infrastructure. “Growth is projected to slow to 4.8% in 2024 [as a whole], down from 5.2% in 2023,” it said.
China’s GDP growth is expected to slow to 4% in 2025 and 3.0% in 2026 said UBS in its 2025 China Outlook. “[This is] with the assumption that the US hikes tariffs on China’s exports [would be] starting in September 2025 and China would increase policy support in response.”
"We expect CPI inflation to weaken to 0.1% in 2025
and -0.2% in 2026 along with a weaker growth.”
UBS added that net exports would likely still contribute positively to GDP growth in 2025, but “we expect exports to fall sharply in 2026, bearing down on manufacturing capex and prices”.
“We expect additional fiscal expansion in 2025-26 to help alleviate local government financial challenges, support infrastructure investment, and help to stabilise the property market,” it said. “Nevertheless, we expect CPI inflation to weaken to 0.1% in 2025 and -0.2% in 2026 along with a weaker growth.”
Moody’s said that “Chinese financial institutions' 2025 outlook remains negative on profitability pressures” and that this was due to weak credit demand, lower interest rates, and slower economic growth.
China and the wider Asian economic region may currently be hoping that the continent’s biggest economy sees a bright 2025 but it’s not completely in their hands with Trump’s tariffs and other expected economic measures likely to take a toll.
“There have been competing views on how the Trump presidency will unfold,” said Ropes & Gray’s report. “Some anticipate heightened tensions, while others believe that Trump’s perceived “transactional” approach to matters could lead to less draconian and more nuanced, negotiated outcomes than what was announced during presidential campaigning.”
They added that this perspective offers “some optimism” that China can deliver mitigation by finding positions attractive to the US as a bargaining tool.
However, they added, investors are increasingly cautious about the regions they invest in and are scrutinising several US and non-US regulations.
There are other divergent areas such as ESG and sustainability and reshoring that could hamper working together too.
These were not the only issues affecting China said the report and that there were plenty of other things for asset managers and investors to take heed of in Asia. The report said that any anticipated interest rate cuts and their impact on investment strategies was “a critical consideration for Asia-focused asset managers”.
“For sponsors that have not built out a credit strategy, we expect to see more
discussions of acquiring these capabilities through strategic acquisitions.”
It also said that crypto would once again rise to the forefront as more people looked to become involved with the buzzy financial system despite many misgivings.
Credit funds were also seen as key. “Credit continues to be an asset class that industry participants in Asia seek additional exposure to, particularly as a way to secure longer-term returns stability in an uncertain economic environment,” said the report. “For sponsors that have not already built out a credit strategy, we expect to see more discussions of acquiring these capabilities through strategic acquisitions.”
