Headline indices of the Mainland China equity market extended losses on Thursday, 02 August 2018, due to renewed worries over an escalating trade war between the world's two biggest economies after U. S. plans to impose a higher 25% tariff on $200 billion worth of Chinese imports. Around late afternoon, the benchmark Shanghai Composite Index declined 3%, or 84.10 points, to 2,740.44, meanwhile the Shenzhen Composite Index, which tracks stocks on China's second exchange, fell 3.74% or 57.89 points, to 1,491.39. The blue-chip CSI300 index dropped 3.1%, or 106.85 points, to 3,340.54.
Investors are worried about US-China trade war after Washington said on Wednesday that it may jack up the tariff rate on the next $200 billion in Chinese imports it plans to target as it pressures Beijing to reform its trade practices. U. S. Trade Representative Robert Lighthizer said President Donald Trump directed him to consider increasing the proposed tariffs to 25% from the planned 10% because China has refused to meet U.
S. demands and has imposed retaliatory tariffs on U. S. goods. Beijing said it would hit back if the United States takes further steps hindering trade, including applying the higher tariff rate.
The new tariff threat on Chinese goods comes just days after Beijing retaliated against the administration's imposition of 25% tariffs on $34 billion in goods. The Trump administration is considering an additional $16 billion in goods, but that review is ongoing, an official said Wednesday.
COMMODITY NEWS: The most active October rebar contract on the Shanghai Futures Exchange was down 1.8% at 4,111 yuan ($603) a tonne by 0206 GMT. Prices of steelmaking raw materials iron ore and coking coal also slid. The most-traded September iron ore on the Dalian Commodity Exchange fell 1.5% to 473.50 yuan per tonne and coking coal lost 1.2% to 1,177.50 yuan. Coke, the processed form of coking coal, dropped 0.7% to 2,282 yuan a tonne.
CURRENCY NEWS: Chinese yuan strengthened against greenback on Thursday, after stronger mid-point fixing by central bank. The People's Bank of China (PBOC) fixed the yuan midpoint at 6.7942 per dollar, 351 basis points stronger than the previous fix of 6.8293. In China's spot foreign exchange market, the yuan is allowed to rise or fall by 2% from the central parity rate each trading day.
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