Impact of Trump Presidency on Chinese Stocks and Yuan: Current Trends and Future Implications
Current Status of Chinese Stocks and the Yuan in November 2024
Chinese Stocks
Chinese stocks have experienced significant volatility recently. On November 6, 2024, the prospect of another Donald Trump presidency and Republican control of the U.S. Congress led to a sharp decline in both the yuan and Chinese stocks. This uncertainty has been a major factor affecting investor sentiment. However, in the days leading up to this, Chinese stocks had been on a positive trajectory. For instance, the China stock market moved higher for two consecutive trading days, accelerating more than 110 points or 3.3 percent. Additionally, Chinese shares surged after Beijing unveiled stimulus measures at the end of September 2024, which reinvigorated investor confidence.
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The Yuan
The Chinese yuan has also been under pressure. The exchange rate of the yuan to the US dollar was 7.13 in August 2024, and it has been weak since early 2023 due to China's sluggish economy and low yields. Recently, the yuan's value has been further impacted by the prospect of a Trump presidency, which has led to a drop in its value. On November 4, 2024, one euro could buy nearly 7.74 yuan, indicating a slight stabilization after a period of fluctuation. However, the overall trend remains downward as investors react to the economic policies and potential implications of a Trump presidency.
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Trump Presidency Economic Policies
Donald Trump's economic policies, if enacted in a second term, are expected to have significant implications for both the U.S. and global economies. His campaign proposals, including tax cuts, are projected to increase primary deficits by $5.8 trillion over the next 10 years. This could have a ripple effect on global markets, including China. Trump has also promised to enact policies that would create an environment to "steal" manufacturing jobs that have moved overseas, which could further impact U.S.-China economic relations.
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In summary, the potential for a Trump presidency has introduced significant uncertainty into the Chinese stock market and the yuan. While there have been recent positive movements in Chinese stocks due to stimulus measures, the broader economic policies and political landscape under a Trump administration could lead to continued volatility.
