(Bloomberg) — Chinese equities slumped and bond futures climbed, showing investors remain concerned about trade tensions even after President Donald Trump signaled over the weekend that he’s open to talks.
The Hang Seng China Enterprises Index fell as much as 3.6% before paring its drop to around 2%. Tech heavyweights Xiaomi Corp. and Alibaba Group Holding Ltd. were among the biggest drags. The CSI 300 Index, a benchmark for mainland shares, closed down 0.5%. The People’s Bank of China boosted its daily reference rate to the strongest since November in a bid to keep the yuan steady.
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The setback follows a sharp rally in Chinese equities this year, as investors shrugged off trade frictions and bought into the country’s tech prowess and Beijing’s ability to support the economy. Trump’s threat late last week to slap an additional 100% tariffs on Chinese goods, in response to Beijing’s export controls on critical minerals, served as a stark reminder of the fragility of any trade truce.
The decline was milder than the 6.1% slump in the Nasdaq Golden Dragon China Index on Friday. Some investors appear to be using the selloff to buy the dip, expecting the worst to be avoided following signals from the White House that it’s open to a deal.
“Markets should brace for near-term volatility from the tariff headlines, but China’s diversified export base and swift policy response mean the broader impact on the economy and markets is contained,” said Dilin Wu, a strategist at Pepperstone Group. “Traders may see this as a short-term shock rather than a structural threat.”
A lasting deterioration of ties between the two largest economies could imperil one of the world’s best performing stock markets this year, as well as renew doubt over China’s investability.
The Hang Seng China gauge climbed nearly 30% in 2025 through Friday as Chinese equities benefited from the trade truce with the US in addition to optimism over the country’s growing heft in artificial intelligence. Tech stocks in particular were on a tear, with Alibaba’s share prices more than doubling this year.
Bucking Monday’s slide were Chinese chipmakers, as investors bet that Beijing will ramp up efforts to curb US tech imports and further nurture local firms. Shares of Semiconductor Manufacturing International Corp. rose 6.7% on the mainland. Rare-earth stocks also rallied as China used the minerals as a key trade lever.
