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Regulators in China sought to reassure markets on Monday as losses for stocks and the renminbi extended a difficult start to the year, in the wake of weak economic data and geopolitical uncertainty ahead of Donald Trump's inauguration.
Mainland China's benchmark CSI 300 index fell 0.2 percent on Monday and was down 4.1 percent in the first three trading days of the year, marking the worst start to 2025 among major Asian indexes.
Small-cap stocks included in the CSI 2000 are down 6.6 percent since the beginning of the year. Hong Kong's Hang Seng Index fell 0.4 percent on Monday and is down 1.2 percent so far this year.
The declines came as Chinese stock exchanges held meetings with international investors and the central bank reaffirmed its determination to maintain currency stability, with Trump threatening to devalue the currency. Significantly increase tariffs on Chinese exports Looming.
“Right now everyone is wondering what Trump 2.0 will bring,” said Jason Lowe, head of Asia-Pacific equity and derivatives strategy at BNP Paribas. “It is reasonable for investors to try to make some profits.”
The Chinese currency fell to a 15-month low of 7.33 renminbi to the dollar on Monday, although the People's Bank of China kept the renminbi's daily trading range steady. Selling pressure on the Chinese currency tends to be associated with bearish pressure Chinese stocksAnalysts said.
Manufacturing data is weak, a The highest level in two years for the dollar index Kevin Liu, a strategist at CICC, said Trump's impending return all contributed to flow pressures on Chinese stocks.
The Shanghai and Shenzhen stock exchanges sought to reassure investors that China's economy is supported by “strong fundamentals and resilience” during a weekend meeting with foreign institutions to “seek opinions and suggestions” on recent moves in Chinese stocks, the Shanghai and Shenzhen stock exchanges said on Sunday.
The central bank on Monday kept its daily fixing rate — the midpoint around which the renminbi is allowed to trade 2 percent in either direction against the dollar — at 7.19 renminbi, despite selling pressure on the currency.
Its newspaper, Financial News, said the central bank “will firmly protect against the risk of exchange rate overshooting and maintain the fundamental stability” of the renminbi.
He added that the central bank's “past experience in multiple rounds of ups and downs” showed that it had “adequate” tools to keep the exchange rate “fundamentally stable.”
In another sign of weak sentiment, investors continued to buy longer-term sovereign debt, as concerns about weak domestic consumption fueled bets that the People's Bank of China will further ease monetary policy.
The yield on China's 10-year government bonds fell 0.015 percentage points to 1.61 percent on Monday, after hitting an all-time low below 1.6 percent last Thursday. Bond yields move inversely with prices.
This year's weaker opening comes despite Beijing's announcements of its desire to boost domestic consumption in the wake of the long real estate crisis.
China's parliament is scheduled to meet in March to unveil its economic policy agenda in what is expected to be a difficult year.
“In terms of the fundamental things to look for in 2025… “We think investors need to see more in terms of consumption,” said Winnie Wu, chief China equity strategist at Bank of America, adding that government support for the private sector and youth employment would be Necessary.
Despite a tough start to 2025, analysts noted that Chinese stocks will be strong in 2024 after a long decline, with the CSI 300 ending the year up 14.7 percent.
“We think the worst of it is over,” Wu said.
