China’s regulators rush to reassure investors as equities and renminbi fall

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China’s regulators sought to reassure markets on Monday as equities and the renminbi extended early-year losses on 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 fell 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 in the CSI 2000 are down 6.6 percent since the start 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 fall came as China’s stock exchanges met with international investors and the central bank reiterated its determination to keep the currency stable, with Trump’s threats. Dramatically increased tariffs on Chinese exports looming

“Right now everyone is wondering what Trump 2.0 will bring,” said Jason Lui, head of Asia-Pacific equity and derivatives strategy at BNP Paribas. “It’s reasonable for investors to try and take some profit.”

China’s currency fell to a 15-month low of Rmb7.33 to the dollar on Monday, even as the People’s Bank of China kept its daily trading band for the onshore renminbi steady. Selling pressure on China’s currency tends to correlate with downward pressure Chinese equityAnalysts said.

Poor production data, a Dollar index hits two-year high and Trump’s impending return have all contributed to outflow pressure on Chinese stocks, said Kevin Liu, strategist at CICC.

The Shanghai and Shenzhen exchanges sought to reassure investors that China’s economy was supported by “solid fundamentals and resilience” at a weekend meeting with foreign institutions to “solicit views and advice” on recent moves in Chinese equities, they said on Sunday.

The central bank on Monday kept the daily fixing rate — the midpoint around which the renminbi is allowed to trade 2 percent against the dollar — at Rmb7.19 despite currency selling pressure.

Its newspaper, Financial News, said the central bank will “strongly guard against the risk of exchange rate overshooting and maintain fundamental stability” of the renminbi.

It added that the central bank’s past “experience of several rounds of appreciation and devaluation” showed it had “adequate” tools to keep the exchange rate “basically stable”.

In another sign of weak sentiment, investors continued to buy long-dated sovereign debt, as concerns over weak domestic consumption strengthened bets that the PBoC will ease monetary policy further.

The yield on 10-year Chinese government bonds fell 0.015 percentage points to 1.61 percent on Monday, down from its all-time low of 1.6 percent last Thursday. Bond yields move inversely to prices.

The weak start to the year comes despite Beijing’s announcement that it wants to boost domestic consumption after a lingering property crisis.

China’s rubber-stamp parliament is set to unveil its economic policy agenda in March in what is expected to be a tough year.

“In terms of the key things to watch in 2025 . . . we think investors need to look more at spending,” said Winnie Wu, chief China equity strategist at Bank of America, adding that government support for the private sector and youth employment will be essential.

Despite a rough start to 2025, analysts noted that Chinese equities had a strong 2024 after a prolonged slump, with the CSI 300 up 14.7 percent at year-end.

“We think the worst of the derating is over,” Wu said.