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What a difference a week makes. Last Monday, the markets were in panic mode following tweets by US President Donald Trump that Washington would increase tariffs on US$200 billion dollars worth of Chinese imports from 10 per cent to 25 per cent.
But on Friday, the Shanghai Composite Index – though still 10 per cent off from an April high – added 3.1 per cent for its biggest gain in six weeks.
The tariff increases have come to pass, but a slew of market observers in China seem more confident this week – analysts told the South China Morning Post over the weekend that markets will have factored in escalations and de-escalations in the trade war and accept it as the new norm.
Of course, commentary from official mouthpieces in Beijing has suggested the Chinese economy will not be “weakened by a little tariff increase”.
Others expect weak markets to push both sides back to the negotiating table.
Stocks in Asia fell on Monday morning in line with US equity futures, while the yuan retreated, after inconclusive talks between Vice-Premier Liu He, China’s top trade war negotiator, and US officials in Washington.
Join us, Zhang Shidong in Shanghai and Yujing Liu and Azar Zaidi in Hong Kong, as we follow the developments in mainland Chinese markets on Monday. Hong Kong is closed for a public holiday, with trading to resume on Tuesday.