China's Strategic Countermeasure Opens a Window for a Domestic Substitution Strategy, Making Synergistic Effects with the Capital Market Under the Technological Characteristic Valuation System

Translated from Insight to Capital

Insight to Capital, April 8 (Reporters Sun Ruxiang, an Intern, Wang Yang) On April 3, U.S. President Trump announced the "most radical tariff plan in history", and on April 4, China quickly responded with countermeasures. A research report by Soochow Securities Co., Ltd. pointed out that China's move is not only a strategic response but also a turning point for domestic substitution and reconstruction of the market structure.

The window for a domestic substitution strategy has opened.

China plans to promote domestic substitution from multiple dimensions from the central government to local governments from 2020 to 2025, with key areas involving semiconductors, basic software and hardware, etc. In the past five years, China's independent innovation capabilities have been significantly improved. Huawei Technologies Co., Ltd., Cambricon Technologies Corporation Limited and other companies have narrowed the gap with the international community in the field of AI chips, and the chip self-sufficiency rate has increased significantly. The autonomy rate of key codes in the kernel of industrial-grade operating systems reaches 100%. The localization rate of mid-to-high-end medical equipment has increased and the cost has decreased. Financial institutions help cultivate emerging domestic technology companies. Although China's composite score in the innovation dimension has made a leap, there is still room for improvement in the localization rate from the perspective of industrial added value and overseas income. When the global economic and trade order is reconstructed, tariff countermeasures have injected accelerated momentum into domestic substitution.

The technological characteristic valuation system reshapes valuation for localization.

Under the technological characteristic valuation system, the capital market and localization will have a synergistic effect, which is a repricing for the replacement of old growth drivers with new ones. Localization forms a positive closed loop through "valuation improvement-confidence improvement-capital inflow-localization rate improvement-valuation improvement", and the synergy of industry and finance enhances the stability of the capital market and economy. The market in the first quarter of this year verified the combination of technological characteristic valuation and the localization of technology companies. After the Spring Festival, DeepSeek triggered a large model efficiency revolution, and the development of other technology industries also accelerated simultaneously. High-end manufacturing has reshaped the global supply chain pattern. Under the leadership of the technological characteristic valuation system, the capital market has given confidence to technology companies, and transaction enthusiasm has continued to increase. China's innovation system has transformed from a single-point breakthrough to systematic evolution. When the localization rate increases, the capital market cooperates with the valuation increase to promote the transformation of China's economy to an innovation-driven one. The technological characteristic valuation is a repricing for the replacement of old growth drivers with new ones.

Strategic countermeasures have triggered the "second revolution" of products made in China.

The industrial transformation triggered by the strategic countermeasures has given rise to the "second revolution" in China's manufacturing industry. The escalation of tariff barriers is an opportunity window for local industrial upgrading, a catalyst for domestic substitution and a strategic fulcrum for the leap in value of the industrial chain. With the increase in the consumption of domestic products and the deepening of the dual circulation, local industries are expected to shift from import substitution to technology output. With the coordination of market and policy, products made in China are expected to break through bottlenecks, complete a qualitative change from "imitation" to "surpassing" to "dominance", and reconstruct the global value chain. During the policy window period, China's industrial chain will build a dual-wheel drive system of "technological innovation + supply chain localization" to enhance the competitiveness of domestic products. History has proved that technological blockades will give rise to a strong innovation system, and China's independent and controllable industrial chain will write a new chapter in the era of globalization 2.0.

The above information is provided for reference purposes only and does not constitute investment advice.