Chinese investors have been advised by UBS Global Wealth Management to adopt a defensive strategy due to concerns over sluggish consumption and potential market volatility linked to anticipated higher tariffs from the incoming Trump administration.

It is recommended to focus on dividend-yielding stocks, particularly in sectors such as banks, utilities, and energy, which offer more attractive returns compared to the current 2% government bond yields.

Chinese equities have started 2025 on a negative note, with the CSI 300 Index experiencing a 2.9% drop, marking the worst annual opening in nearly a decade. Despite government stimulus measures aimed at stabilizing the market, investor sentiment remains cautious due to economic uncertainties surrounding the upcoming inauguration of President-elect Trump.

In response to tariff impacts, the Chinese government plans to issue additional ultra-long special treasury bonds in 2025 to support consumer product trade programs and fund significant projects.

China's bond yields have continued to decline, with the 10-year government bond yield falling below 1.6%, reaching a historic low. This reflects the ongoing challenges faced by the world's second-largest economy as it navigates a complex financial landscape.