The United States President-elect Trump is in the process of forming a hawkish new cabinet, causing a double blow to Chinese stocks and currency. On November 12th, China’s A-shares plunged significantly in the afternoon, and the Hong Kong stock market also experienced a sharp decline. At the same time, the yuan against the US dollar saw its reference rate dropping for the second consecutive time, hitting a new low since September 12th of last year.
In the afternoon trading session, the Shanghai Composite Index fell by 48.1 points, a decrease of 1.39%, closing at 3,421.97 points. The Shenzhen Component Index dropped by 74.11 points, down 0.65%, closing at 11,314.46 points. The ChiNext Index closed down by 1.64 points, a decline of 0.07%, at 2,390.8 points. The CSI 300 Index fell by 45.39 points, a decrease of 1.1%, ending at 4,085.74 points.
Out of the market’s total, 1,486 stocks rose while 3,773 stocks declined.
In the Hong Kong market, the Hang Seng Index dropped by 580.05 points, a decline of 2.84%, closing at 19,846.88, breaching the key level of 20,000. The Hang Seng China Enterprises Index fell by 228.43 points, ending at 7,127.14, down by 3.11%. The Hang Seng TECH Index saw a decrease of 194.85 points, closing at 4,456.86 points, a decline of 4.19%.
Simultaneously, the yuan against the US dollar reference rate was set at 7.1927, a decrease of 141 points from the previous trading day, marking a new low in 14 months since September 12th of last year.
The onshore yuan against the US dollar opened at 7.2122 in the morning, dropping by 223 points, and continued to slide, breaking through the levels of 7.22 and 7.23, closing at 7.2378, a significant drop of 479 points from the previous trading day, hitting a new low since early August.
The offshore yuan against the US dollar exchange rate fell by 0.3%, with 1 US dollar equivalent to 7.25 Chinese yuan, the lowest level in over three months.
According to a report from the Hong Kong Economic Daily, with Trump preparing to return to the White House, the recent external pressure from a strong US dollar has not diminished. In the short term, the Chinese yuan is expected to remain under pressure.
Several international investment banks have downgraded their forecasts for the yuan next year. J.P. Morgan and UBS believe that the onshore yuan against the US dollar may fall to 7.5 yuan, or even lower.
Financial blogger and influential figure “Special Financial Management” wrote in a blog post: “Today’s (A-shares) plunge is said to be due to currency reasons, with rumors that Trump has appointed a hardline figure on China policy. The continuous depreciation of the yuan, along with the fact that the Fed’s 25 basis points rate cut couldn’t stem the tide, is mainly due to the current exchange rate trading on expectations of Trump’s possible tariffs on China, which are unfavorable for exports, leading to the appreciation of the dollar.”
On November 11th, several US media outlets cited sources saying that Trump intends to pick Michael Waltz and Marco Rubio, both harsh critics of the Chinese Communist Party, for his new cabinet.
The Wall Street Journal first reported that Trump had invited Waltz to serve as National Security Advisor, and later many US media outlets each quoted sources confirming the news. Waltz is considered one of the most hawkish members of Congress on China policy. In 2021, he stated, “We are in a cold war with the CCP.”
The New York Times initially reported that Trump plans to nominate Senator Marco Rubio as Secretary of State. Back in July 2020, due to Rubio’s tough stance on China’s human rights abuses, the Chinese government had included Rubio on its so-called sanctions list.
Josh Rogin, a senior columnist at The Washington Post and a China hawk, posted on X platform, saying: “Trump’s appointments of Waltz and Rubio are likely to make Beijing leaders nervous. This is good. America should have had leaders who understand the character and danger of the Chinese Communist Party’s foreign policies long ago.”