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Chinese regulators sought to reassure markets on Monday as equities and the renminbi extended losses at the start of the year, following weak economic data and geopolitical uncertainty ahead of Donald Trump's inauguration.
China's benchmark CSI 300 index fell 0.2 percent on Monday and fell 4.1 percent in the first three trading days of the year, marking the worst start to 2025 among major Asian indices.
Small stocks in the CSI 2000 have fallen 6.6 percent since the beginning of the year. Hong Kong's Hang Seng index shed 0.4 percent on Monday and is down 1.2 percent so far this year.
The drop came as China's stock exchange held meetings with foreign investors and the central bank reaffirmed its determination to keep the currency stable, amid Trump's threat. sharply increased tariffs on Chinese exports coming.
“Right now everyone is wondering what Trump 2.0 will bring,” said Jason Lui, head of Asia-Pacific equity and exit strategy at BNP Paribas. “It makes sense for investors to try to take profits.”
The Chinese currency fell to a 15-month low of Rmb7.33 to the dollar on Monday, although the People's Bank of China held its daily trading band on the onshore renminbi. Selling pressure in the Chinese currency tends to be associated with lower pressures China sharessay analysts.
Sensitive synthetic data, a two-year high for the dollar index and Trump's impending return have all contributed to the pressure to exit Chinese stocks, said Kevin Liu, CICC analyst.
The Shanghai and Shenzhen exchanges sought to reassure investors that China's economy is underpinned by “solid foundations and resilience” at a weekend meeting with foreign institutions to “solicit comments and advice” on the direction of Chinese businesses, they said on Sunday.
The central bank on Monday kept the daily adjustment rate – the midpoint where the renminbi is allowed to trade by 2 percent in any direction against the dollar – at Rmb7.19, despite selling currency pressure.
Its newspaper, Financial News, said the central bank would “firmly guard against the risk of overshooting the exchange rate and maintain the fundamental stability” of the renminbi.
It added that the central bank's past “experience of multiple appreciations and devaluations” showed it had “adequate” resources to keep the exchange rate “stable”.
In another sign of weak sentiment, investors continued to buy long-term debt, as concerns about weak domestic consumption forecasts strengthened bets that the PBoC will ease monetary policy.
The yield on 10-year Chinese government bonds fell 0.015 percentage points to 1.61 percent on Monday, after hitting an all-time low of 1.6 percent last Thursday. Bond yields move inversely with prices.
The weak opening this year comes despite announcements from Beijing that it wants to boost domestic consumption following a long-term property crisis.
China's rubber parliament is expected to meet in March to reveal the economic policy agenda this year is expected to be difficult.
“In terms of the priorities you need to look at in 2025. . . we think investors need to see more about consumption,” said Winnie Wu, chief China equity strategist at Bank of America, adding that government support for the private sector and youth employment will be necessary.
Despite a bad start to 2025, analysts noted that Chinese equities had a strong 2024 after a long decline, with the CSI 300 ending the year up 14.7 percent.
“We think the worst of the scandal is over,” Wu said.