Chinese Stock Market Falters Under 'Tariff Bomb'... Attention on Escalating Trade War

The Chinese stock market is faltering under the 'tariff bomb' from the United States. As U.S. President Donald Trump imposes a relatively high reciprocal tariff of 34% on China compared to other countries, investor sentiment is rapidly freezing.

China is also immediately imposing a 34% tariff on all U.S. products, launching a strong retaliatory battle, pushing the global tariff war to the extreme. As the two major countries (G2) officially enter the trade war, concerns about a global economic recession are hindering the recovery of the Chinese stock market.

The recent downgrade of China's credit rating by the international credit rating agency Fitch for the first time in 18 years is also strongly suppressing the Chinese stock market.

The Shanghai Composite Index closed at 3,342.01, down 0.24% from the previous trading day, just before the Qingming Festival holiday on the 3rd. Over the past week, it fell by a total of 0.27%. On the same day, the CSI300 index, composed of large-cap stocks on the Shanghai and Shenzhen stock exchanges, also closed at 3,861.5, down 0.59% from the previous trading day. Over the past week, the decline was 1.37%, larger than that of the Shanghai Composite Index.

The future volatility of the Chinese stock market is expected to be determined by the trade war dynamics between the U.S. and China. Particularly this week, major Chinese economic indicators are being released, drawing the attention of investors.

On the 8th, China's foreign exchange reserves denominated in U.S. dollars as of the end of March will be disclosed. China's foreign exchange reserves in the previous month were $3.2272 trillion, an increase of $18.188 billion (0.57%) from the previous month.

On the 10th, China's Consumer Price Index (CPI) for March will be announced. Despite the Chinese government's successive economic stimulus measures, fears of deflation (a decline in prices amid an economic downturn) are growing, focusing attention on the CPI to be announced that day. The CPI for February turned negative for the first time in 13 months. The decline was larger than market experts' forecasts. Investment banks (IBs) interpret this as a result of sluggish consumption. They also expect China's price decline to continue for the time being. The Chinese government maintains its stance that there is no change in the trend of price stability and recovery.

On the 11th, China's new loans and loan balance increases for March will be announced, and on the 12th, China's export and import volumes as of March will be released. This is the first time China's trade balance data is being disclosed since the tariff war triggered by the U.S. has intensified.

Beijing Correspondent Kim Eun-jung kej@hankyung.com