Chinese stocks plummet, yuan slides amid COVID protests

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Investing.com– Chinese stock markets and the yuan slumped to an over two-week low on Monday as protests against the government’s anti-COVID measures broke out in several major cities, raising the prospect of more economic disruption. 

Chinese civilians clashed with the police in several cities including Beijing and Shanghai over the weekend, as public discontent with the zero-COVID policy hit a peak after a deadly fire in western China last week. This also comes after riots in Zhengzhou over the government’s reimposition of a lockdown in the city. 

China’s bluechip Shanghai Shenzhen CSI 300 index fell 2.2%, while the Shanghai Composite index fell 1.6%. Selling also spilled over into Hong Kong, with the Hang Seng index tumbling 3.6%. 

The yuan slumped 0.8% to 7.2281 to the dollar, while the offshore yuan fell 0.6% to $7.2415. Both currencies and the Chinese indexes traded at their weakest level in over two weeks. 

The protests mark an extreme reversal in market sentiment towards China after hopes that the country would relax its strict zero-COVID policy spurred some buying into local markets earlier this month.

But China instead tightened its anti-COVID measures in recent weeks, as the country grapples with a record-high rate of daily infections. 

While the rise in infections is still small in comparison to levels seen in other countries, Chinese officials reiterated their commitment to the zero-COVID policy due to low vaccination rates and a lack of healthcare infrastructure. 

The strict zero-COVID measures severely weighed on Chinese economic growth this year, as the country shut down several industrial hubs to curb rising infections. While the government rolled out a slew of stimulus measures to help support growth, they have so far had a limited effect on the economy. 

Data over the weekend showed China’s industrial profits dropped further in October, while PMI data due later this week is expected to show continued weakness in business activity.