Uncertainty Grips Chinese Markets Amid Trump’s Return to Power

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As Donald Trump prepares for his return to the White House on January 20, 2025, Chinese markets are facing significant turmoil. The yuan has plummeted to its lowest value against the U.S. dollar in 16 months, reflecting growing investor mistrust in light of Trump’s threat to impose new tariffs on Chinese goods. The Shanghai and Shenzhen stock exchanges reported a decline of over 4% in China's benchmark CSI 300 index at the beginning of the year, although it has since shown signs of stabilization.

The People's Bank of China (PBOC) is stepping in to curb the effects of this uncertainty. On January 8, the yuans fell to 7.33 against the dollar, prompting the central bank to increase its daily reference rate. Additionally, China plans to conduct a major bond sale operation in Hong Kong, worth 60 billion yuan, aiming to tighten liquidity and bolster the currency.

Analysts express concern that the PBOC may need to weaken the yuan further if new tariffs come into play, exacerbating China's ongoing economic challenges. With weak domestic demand persisting, the Chinese government has extended a subsidy program for household appliance purchases to stimulate consumer spending.

Despite the dire economic indicators and looming political uncertainties, state media attributes the currency's decline to global pressures rather than fundamental weaknesses in China's finances. Investor sentiment remains cautious as the world watches for Trump's first actions once he resumes office.

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