Chinese stocks moved within a limited range, on Wednesday, and headed towards recording sharp quarterly losses, after the latest stimulus measures announced by Beijing failed to convince investors of the imminence of a strong recovery in domestic demand.
On the other hand, the yuan continued to rise against the dollar, heading towards recording gains for the seventh consecutive quarter, supported by exporters converting their dollar revenues into the local currency.
The CSI 300 index of leading stocks rose 0.2 percent in morning trading, but remained close to the lowest level in a year that it recorded earlier in the week. The index is heading for a loss of about 13 percent during the third quarter, which is the largest since the closure measures related to the “Covid-19” pandemic in 2022.
The Shanghai Composite Index rose 0.3 percent by the mid-session break, but it is also heading for a quarterly decline of about 6.2 percent, the largest decline in four years.
The losses reflect investors' concern about an economy that is moving at two speeds. Industrial production and exports continue to show some strength, while consumption, investment and the real estate market remain under pressure.
The decline in technology stocks, which were among the most prominent market drivers, added to the weak sentiment.
On Tuesday, Beijing announced a set of measures to provide cheaper credit and support the housing market. The People's Bank of China cut the one-year collateralized supplementary lending rate by 25 basis points to 1.5 percent to support infrastructure investment, raised re-lending quotas for technology companies and small businesses, and provided mortgage support for some first-time buyers.
But investors saw the measures as still falling short of what was needed to bring about a shift in confidence.
Duncan Wrigley, chief China economist at Pantheon Macroeconomics, said that the package is the broadest and strongest in two years, but it remains smaller than the easing announced in September 2024, stressing that it does not address the structural imbalances represented by weak domestic demand and heavy dependence on exports.
Liquidity also declined ahead of the National Day holiday that begins Thursday, as total trading on the Shanghai and Shenzhen stock exchanges fell to 1.41 trillion yuan on Tuesday, the lowest level since July 2025.
Technology stocks were under additional pressure, as the semiconductor index fell by more than 2 percent, heading for a 32 percent loss since June, while the artificial intelligence index fell 1.2 percent, and is heading for a quarterly decline of about 25 percent. In Hong Kong, the Hang Seng Index was almost stable, while the index of Chinese companies listed in the city rose 0.1 percent.
In the currency market, the yuan rose to 6.7047 against the dollar, with exporters increasing their sales of the US currency before the week-long holiday. The yuan has achieved gains of 4.3 percent since the beginning of the year, and is on track to rise for the seventh consecutive quarter.
The People's Bank of China set the indicative rate at 6.7351 yuan to the dollar, the strongest level since February 2023. ICBC International analysts said that the settlement of foreign exchange revenues was the direct driver of the yuan's rise this year, with the increasing tendency of companies to convert their dollar holdings into the Chinese currency.
The contrast between the performance of stocks and the yuan highlights a complex picture of the Chinese economy: the currency benefits from strong exports and foreign exchange transfer flows, while the stock market needs clearer indicators of the recovery of real estate and consumption before investor confidence is restored.
