China is taking steps to support falling yuan and stock markets amid concerns of Trump's return

From Investing.com: 2025-01-06 00:31:00

China’s stock exchanges and central bank rushed to defend a tumbling yuan and falling stock markets as concerns about Trump’s return to the White House grew. The yuan weakened to a 16-month low, and the blue-chip stock index hit its weakest level since September. The index fell 5% last week, its biggest loss in over two years.

Chinese authorities assured investors they would continue to open up China’s capital markets. The People’s Bank of China may issue more yuan bills in Hong Kong in January to absorb currency and dampen speculation. The PBOC has tools and experience to react to yuan depreciation.

The world’s second-biggest economy has struggled with a property downturn and slowing income. Exports, a bright spot, could face hefty U.S. tariffs under a second Trump administration. The has risen 4% while China’s index has dropped 4.3% since the U.S. election.

Chinese authorities introduced support measures since September, including schemes totaling 800 billion yuan, to shore up investor confidence. The yuan has routinely hit multi-month lows since Trump’s election, dropping 2.8% against the dollar in 2024, its third annual decline.

Despite China’s efforts to stall the yuan’s decline, falling domestic yields and strong dollar have undercut their efforts. The central bank warned fund managers against pushing bond yields lower. Bond yields up to the 3-year tenor are trading below the short-term policy rate, signaling bearishness on the economy.

Investors are waiting for concrete signs that China’s economy is responding to stabilizing measures. A key test for consumer confidence will be the Lunar New Year celebrations starting on Jan. 29. ($1 = 7.3281 renminbi)



Read more at Investing.com: China scrambles to shore up sliding yuan and stock markets By Reuters