Chinese exchanges reportedly urge fund managers to limit stock sales as market braces for Trump return

China’s stock exchanges are taking decisive action, urging major mutual funds to limit stock sales as the country faces a weakening yuan and stock market volatility. The move is part of Beijing’s previous efforts to stabilize the economy Donald Trump Beginning his second term as President of the United States.

what happened: The yuan fell to its lowest level in 16 months and the blue-chip stock index (CSI 300) hit its lowest since September, down 0.8% on Monday. The index fell 5% last week, its biggest weekly loss in more than two years. The Shanghai and Shenzhen stock exchanges held meetings with foreign institutions to ensure the markets remain open, Reuters reported on Monday.

Starting early this year, exchanges have instructed at least four large mutual funds to buy more stocks than they sell, three sources said. The directive is intended to reduce market volatility amid concerns that the incoming U.S. administration may impose tariffs on Chinese goods.

See also: Apple rivals Huawei, Alibaba and others get boost as China offers subsidies to smartphone buyers

Relevant authorities have taken a variety of measures to support capital markets, including an 800 billion yuan swap and re-lending program for stock purchases. The Central Economic Work Conference in December emphasized stabilizing the stock market and real estate market as the main goal in 2025.

why it’s important: The recent action by Chinese exchanges comes after Chinese stocks rebounded sharply in 2024 after three years of sluggishness. Last year, the CSI 300 Index rose 14.7%, and the Shanghai Composite Index rose 12.8%. Hong Kong’s Hang Seng Index also rose 17.7%, posting its first annual gain in five years. The recovery was attributed to stronger-than-expected policy support from Chinese authorities, including interest rate cuts and financing plans to spur stock buying.

In addition, China is considering allowing the yuan to depreciate significantly in 2025 in response to possible 60% tariffs imposed by the United States on Chinese imports. This potential devaluation represents a major shift in Beijing’s currency strategy amid growing economic pressure.

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Disclaimer: This content was produced in part with help from Benzinga Neuro, and is reviewed and published by Benzinga editors.

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