China’s central bank and stock exchanges took emergency measures on Monday to stabilize the yuan and stock markets, which have been under pressure due to fears of a potential return of tariffs under a second Trump administration. The yuan fell to its lowest level in 16 months, while China’s blue-chip stock index (.CSI300) dropped 0.2% after a weak start to the year.
The Chinese government’s actions included calls to large mutual funds, asking them to limit stock sales and buy more to curb market panic. Meanwhile, the People’s Bank of China (PBOC) is reportedly considering issuing more yuan bills in Hong Kong to absorb excess currency and reduce speculation.
Experts warn that preventing further yuan depreciation is crucial for China’s economic recovery, which has been stunted by a property downturn and sluggish consumer demand. Geopolitical tensions, particularly the threat of U.S. tariffs, have compounded concerns about China’s economic outlook. The yuan dropped 2.8% against the dollar in 2024, marking its third consecutive annual decline.
Despite efforts by Chinese authorities to stabilize the currency and stock market, investor confidence remains fragile. Analysts stress the need for tangible signs of economic recovery, especially as China prepares for the upcoming Lunar New Year.
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