The first trading day of July saw the Shanghai Composite Index climb strongly, driven by gains in banking, power, and other sectors. By market close, the index rose 0.39% to 3,457.75 points, while the Shenzhen Component Index gained 0.11% at 10,476.29 points. The创业板 (ChiNext) dipped slightly by 0.24% to 2,147.92 points, and the北证50 (Beijing Stock Exchange 50) rose 0.68%. Total trading volume across Shanghai, Shenzhen, and Beijing markets reached 1.4968 trillion yuan, down about 20 billion yuan from the previous day.
Sector performance was mixed: alcohol, securities, and real estate declined, while pharmaceuticals, power, and banking led the gains. Industrial metals, steel, and chemicals also showed strength. Themes like innovative drugs, photolithography machines, and controlled nuclear fusion remained active in investor sentiment.
👉 Discover how policy shifts are creating new investment momentum in high-growth sectors.
Market Outlook: Q2 Resilience Meets Policy Tailwinds
According to Donghai Securities, July marks the beginning of the semi-annual earnings preview season, where fundamentals—particularly earnings—may play a stronger role in asset pricing. Despite global headwinds, China’s economy has shown resilience in Q2. Meanwhile, the recent easing in U.S.-China trade tensions has alleviated export pressures. These factors suggest that incremental policy support will likely remain moderate in the near term—but strategically impactful.
Let’s explore four key investment themes emerging from current macro and policy developments: innovative pharmaceuticals, HVAC and cooling infrastructure, AI-driven telecom growth, and nuclear fusion commercialization.
Policy Support Fuels Innovation in the Pharmaceutical Sector
On June 30, China’s National Healthcare Security Administration (NHSA) and National Health Commission jointly released the Several Measures to Support High-Quality Development of Innovative Drugs. A follow-up press conference on July 1 clarified the policy’s scope and implementation strategy.
The initiative outlines 16 actionable policies across five pillars:
- Strengthening R&D support for innovative drugs
- Accelerating inclusion in national医保 (medical insurance) and commercial health insurance directories
- Encouraging clinical adoption
- Enhancing diversified payment mechanisms
- Reinforcing organizational and regulatory backing
This comprehensive framework aims to ensure that only genuine innovation receives support—fostering a market environment that rewards differentiation, scientific rigor, and patient impact.
👉 See how regulatory clarity is unlocking long-term value in biotech innovation.
Why This Matters for Investors
Citigroup Research highlights that China’s innovative drug sector has already achieved notable milestones—from breakthrough therapies to international approvals. With this new policy, the government is signaling a long-term commitment to building a globally competitive biopharma ecosystem.
Key investment implications:
- Dual-directory alignment: The NHSA plans to synchronize submissions for both医保 and commercial insurance drug lists, reducing administrative burden on companies.
- Faster market access: Streamlined processes mean quicker reimbursement—boosting revenue visibility for innovators.
- Increased investor confidence: Domestic policy tailwinds now complement overseas success stories.
Analysts recommend focusing on three strategic dimensions in H2 2025:
- Innovation-driven pipelines
- Globalization + supply chain autonomy
- Out-of-hospital marketing model transformation
Among these, innovative drugs offer the strongest beta—positioned to benefit from both regulatory momentum and growing demand for cutting-edge treatments.
HVAC Equipment Demand Surges Amid AI-Powered Data Center Expansion
As global computing power enters a new high-growth cycle, demand for advanced heating, ventilation, and air conditioning (HVAC) and cooling systems is accelerating rapidly.
Cooling Infrastructure at the Heart of AI Growth
Data centers powered by artificial intelligence require unprecedented thermal management solutions. With server power density on the rise, traditional air cooling is no longer sufficient. Liquid cooling—especially cold plate-based systems—has become the dominant solution.
Key components include:
- Cooling Distribution Units (CDUs)
- Cold plates
- Quick-connect couplings
These technologies are evolving rapidly to meet higher thermal loads from AI chips and GPU clusters.
Global Market Dynamics
In the cold source segment, global leaders like Johnson Controls, Carrier, Daikin, and Trane dominate overseas markets. However, as data center construction accelerates worldwide, supply chains are nearing tightness—creating opportunities for qualified suppliers.
For end-user liquid cooling equipment, investors should focus on companies with:
- Proven technical expertise
- Established international distribution networks
With hyperscale data centers expanding across North America and Asia, the HVAC sector is entering a sustained upcycle—one closely tied to AI infrastructure development.
AI Drives Strong Performance in Telecom Equipment Sector
Second-quarter earnings forecasts for communication companies in 2025 show divergence but overall improvement compared to Q1.
North American AI Boom Lifts Optical Components
The surge in AI demand—particularly from U.S.-based tech giants—is driving rapid revenue growth for optical module leaders. Secondary players in the space are also seeing accelerated performance.
Domestically:
- Chinese optical module and switch manufacturers are benefiting from rising local AI investment.
- Traditional telecom equipment faces pressure due to slower capex cycles.
- The AIDC (AI Data Center) segment, though capital-intensive, is expected to see improved earnings in late 2025 as projects come online.
Sub-Sector Highlights
- Optical Modules: Strongest growth trajectory; beneficiaries of both domestic and international AI buildouts.
- AIDC: Delayed but inevitable profitability; watch for margin inflection in H2.
- Carriers: Stable performance with improved year-over-year growth expectations.
- Subsea Cables: Rising deep-sea infrastructure investments are pushing fiber optic and submarine cable industries upward.
- IoT Modules: Continued cyclical strength; QoQ growth anticipated.
Core keywords: innovative drugs, HVAC equipment, AI telecom growth, nuclear fusion, data center cooling, pharmaceutical policy, optical modules
Nuclear Fusion Inches Toward Commercial Reality
On June 30, Commonwealth Fusion Systems (CFS), a spin-off from MIT founded in 2018, announced a landmark agreement with Google: by the early 2030s, CFS will deliver 200MW of fusion-generated electricity from its ARC commercial plant to power Google’s data centers.
This marks the first commercial power purchase agreement (PPA) for nuclear fusion energy—long considered the "holy grail" of clean energy.
Market Growth Forecast
According to The Business Research Company:
- Global controlled nuclear fusion market size: $331.5 billion in 2024
- Projected to reach $351.1 billion in 2025
- Expected CAGR of 8.1% through 2029, reaching $479.5 billion
Drivers include:
- Private sector investment
- Global energy transition goals
- Advancing superconducting magnet and plasma confinement technologies
- Supportive government policies
With CFS building its ARC demonstration project near Virginia’s massive data center corridor, fusion energy is no longer science fiction—it's becoming part of the energy infrastructure roadmap.
Frequently Asked Questions (FAQ)
Q: What does the new innovative drug policy mean for biotech investors?
A: It provides a clear roadmap for faster market access, better reimbursement, and stronger R&D incentives—making China’s biopharma sector more attractive for long-term investment.
Q: Why is HVAC equipment linked to AI growth?
A: AI servers generate extreme heat; efficient cooling via liquid systems is essential. As data centers expand globally, HVAC demand follows directly.
Q: Is nuclear fusion really close to commercialization?
A: While full grid integration is still years away, Google’s PPA with CFS proves that major tech firms are treating fusion as a credible future energy source.
Q: Which telecom subsectors are most promising in 2025?
A: Optical modules lead due to AI-driven demand; AIDC and IoT modules also show strong momentum.
Q: How will the synchronized医保 and commercial drug directories help companies?
A: It reduces duplication in applications, lowers compliance costs, and speeds up dual-market entry—improving commercialization efficiency.
Q: What impact does data center expansion have on cooling technology?
A: It drives innovation in liquid cooling solutions like cold plates and CDUs, creating growth opportunities for component makers with technical edge.
Final Thoughts: Aligning Portfolios with Structural Shifts
The convergence of policy support, technological advancement, and infrastructure expansion is reshaping several key sectors. From innovative pharmaceuticals gaining regulatory clarity to HVAC systems riding the AI wave and fusion energy stepping into commercial view—the investment landscape is rich with opportunity.
Now is the time to reassess portfolios with an eye toward structural trends rather than short-term volatility.
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