Chinese equities head into Thursday’s open with investors juggling a familiar mix of forces: slowing domestic data, persistent property stress, a stronger yuan – and a surprisingly upbeat global backdrop led by Wall Street’s latest push toward record highs.
Here’s a detailed look at what happened on Wednesday 3 December 2025, and the 10 key things traders will be watching before the mainland market bell rings on 4 December 2025.
How China and Hong Kong Markets Closed on 3 December
Mainland benchmarks slipped on Wednesday as weak services data and renewed worries over developers weighed on sentiment:
- The Shanghai Composite Index fell about 0.5% to 3,878, while the Shenzhen Component lost roughly 0.8% to 12,955, and the ChiNext growth board dropped 1.1% to around 3,037. Turnover on the Shanghai and Shenzhen exchanges rose to about 1.67 trillion yuan, up from 1.59 trillion yuan the previous session, signalling active but cautious trading. [1]
- Sector-wise, coal, non‑ferrous metals and ultra‑hard materials outperformed, while AI application, e‑commerce, lithium, consumer electronics, solid‑state battery, “computing power” and other high‑beta tech themes saw broad declines. [2]
In Hong Kong, the pullback was sharper:
- The Hang Seng Index dropped 1.28% to 25,760.73, with the Hang Seng China Enterprises Index down 1.68% and the Hang Seng Tech Index off 1.58%. [3]
- A separate wrap noted that Hong Kong’s China property gauge fell around 1.5%, while mainland real-estate shares in the CSI 300 dropped more than 2%, as developer concerns resurfaced. [4]
In short: the rotation out of crowded AI/growth trades and back into old‑economy cyclicals continued, but the real drag came from fresh worries over property and macro momentum.
1. Services Growth Slows; Factories Slide Back into Contraction
Fresh November PMI data released this week is the single biggest macro input for Thursday’s open.
- A private survey of China’s services sector, compiled by RatingDog and summarised by China Economic Review, showed its general services PMI slipping to 52.1 in November from 52.6 in October, the lowest reading in five months – still expansionary, but clearly cooling. New orders remained in growth territory but at a slower pace; firms continued trimming staff, and the expectations index fell to its weakest level since April. [5]
- On the manufacturing side, RatingDog’s China General Manufacturing PMI dropped back below the 50 line to 49.9 in November from 50.6 in October, missing market expectations for further expansion. An accompanying Reuters report highlighted weaker domestic demand and stalled output, even as export orders improved after a recent US–China trade truce. [6]
Taken together, the PMIs sketch a picture of sluggish domestic demand: services are still growing, but more slowly; factories are contracting again; and employment in both remains under pressure. This combination was explicitly cited by analysts as a key factor behind Wednesday’s decline in Shanghai and Hong Kong. [7]
Why it matters for the open:
- Weak PMIs tighten the link between macro sentiment and cyclical sectors like industrials, materials and consumer discretionary.
- Traders will be gauging whether Wednesday’s sell‑off was a one‑day adjustment to the PMI surprise – or the start of a deeper reassessment of China’s 2026 growth trajectory.
2. Beijing Is Expected to Stick With a 5% Growth Target for 2026
Even as near‑term data cool, policymakers are signalling they’re not backing away from relatively ambitious medium‑term goals.
A detailed Reuters piece, widely cited in Wednesday’s coverage, reports that senior advisers expect China to set its 2026 GDP growth target at around 5%, similar to 2025. [8]
Key points from that reporting and subsequent analysis:
- Hitting 5% in 2026 would likely require continued “proactive” fiscal policy, including a budget deficit above 4% of GDP and another year of heavy government bond issuance. [9]
- Policy is expected to tilt more toward household support and services‑led growth, while still funding strategic sectors such as AI, green energy and advanced manufacturing. TS2 Tech
- International forecasters (including BBVA Research and the OECD, as summarized by TS2) see China settling into slower but still meaningful annual growth in the 4.4–5% range, reinforcing the idea of a “policy‑heavy,” structurally slower expansion. TS2 Tech
Market implication: the growth target itself is unlikely to shock investors, but achieving it means more targeted, not blanket, stimulus. Equity markets will be hypersensitive to hints from the upcoming Central Economic Work Conference about how Beijing plans to deploy that support – especially toward property, local government finance and consumer demand.
3. Property Slump and China Vanke Still Dominate Risk Sentiment
If there is one sector that continues to set the tone for Chinese equities, it is real estate.
On Wednesday:
- A Reuters‑sourced report, carried by Asia Financial, noted that China’s property market is now in its fifth year of downturn, with analysts expecting weakness to persist through 2026. [10]
- Rating agency Fitch placed China Vanke, one of the country’s largest developers, on “Rating Watch Negative”, after the company asked domestic bondholders for permission to delay repayment of a 2‑billion‑yuan note by a year. Vanke’s Shenzhen‑listed shares fell to their lowest level since 2006, and Hong Kong‑listed shares also slid. [11]
A deeper breakdown of Vanke’s situation from TS2 shows:
- The developer is seeking breathing room on a series of onshore bonds, with analysts estimating over 13 billion yuan in problematic notes stretching into mid‑2026 and more than 30 billion yuan in shareholder loans from the Shenzhen Metro operator. TS2 Tech
- Some Vanke bonds trade at roughly 20–25% of face value, reflecting market scepticism about a painless restructuring. TS2 Tech
On the housing-price front, recent data from China Index Academy (also summarised in the TS2 piece) show:
- New‑home prices in 100 major cities rose about 0.37% month‑on‑month in November, accelerating from 0.28% in October.
- Existing‑home prices, however, fell 0.94%, a steeper drop than the prior month. TS2 Tech
That divergence – new builds stabilised by discounts and policy support, resale prices sliding – underscores a persistent wealth effect drag on consumers, even as Beijing experiments with targeted tools like prospective mortgage subsidies and easing of purchase restrictions in select cities. TS2 Tech
For Thursday’s open, property remains the main swing factor:
- Developers, property‑linked banks, construction names and home‑appliance makers are all sensitive to any new headlines on Vanke or on local support schemes.
- Short‑term, investors may continue to demand a higher risk premium for anything tied to housing or local government financing vehicles (LGFVs).
4. Local-Government Debt Pile Keeps Growing
The property slump feeds straight into the balance sheets of local governments, and that story is also moving markets.
A widely shared report from The Nation in Thailand, drawing on Chinese and Japanese data, estimates that:
- China’s local government debt – including official bonds and LGFV liabilities – has reached roughly 134 trillion yuan, equivalent to about 600 trillion baht, and more than double levels a decade ago. [12]
- Local bond issuance this year has already exceeded 10 trillion yuan, an all‑time high, while land‑sale revenue has slumped from 8.7 trillion yuan in 2021 to less than 2.5 trillion yuan in the first ten months of 2025. [13]
At the same time, Beijing has earmarked at least 500 billion yuan in central funding to help localities tackle overdue payments and restructure debts, and officials argue that overall government leverage remains “manageable.” [14]
Regulators are also quietly probing interest‑rate risk in banks’ bond portfolios, asking lenders how they classify and realise gains on government and policy‑bank bonds after yields rose around 20 basis points in the second half of the year. TS2 Tech
Why equity markets care:
- Elevated local‑government and LGFV debt limit the scope for massive, old‑style infrastructure stimulus, making selective, credit‑efficient spending more likely.
- Bank stocks are sensitive to potential LGFV restructurings, bond‑portfolio losses and margin pressure if regulators push lending rates down faster than deposit costs.
5. Yuan Near 14‑Month High as PBOC Sets Strongest Fix in Over a Year
Currency moves are becoming a central part of the China‑equity narrative.
On Tuesday/Wednesday:
- China’s onshore yuan briefly strengthened to about 7.064 per US dollar, its strongest level since October 2024, while the offshore yuan traded near 7.062. [15]
- The People’s Bank of China (PBOC) set the daily fixing at 7.0754, the firmest since October 2024 and stronger than market models implied, reinforcing the signal that authorities are comfortable with a gradually stronger currency. [16]
- Reuters reporting via MarketScreener adds that major investment houses now expect the yuan to appreciate past the psychologically important 7‑per‑dollar level in 2026, with one BofA forecast calling for 6.80 per dollar by end‑2026. [17]
Another Reuters analysis argues that a rising yuan has not derailed China’s export boom: despite a roughly 3% appreciation since April, China’s real effective exchange rate is the weakest in about 15 years, and export volumes are up around 40% since 2019, helped by dominance in EVs, solar, batteries and other high‑value goods. [18]
A separate note cites cross‑border yuan settlement of around 13 trillion yuan in the first three quarters of 2025, up 11% year‑on‑year, underscoring Beijing’s push to internationalise the currency. [19]
For stocks, a stronger yuan is a double‑edged sword:
- It can support foreign inflows and reduce FX‑related outflow pressure, which is positive for A‑shares and Hong Kong‑listed mainland firms.
- But it may pressure exporters’ margins and complicate life for highly leveraged developers or LGFVs with foreign‑currency debt.
Expect traders to watch exporters, consumer brands and FX‑sensitive sectors at the open to see how they digest the latest move.
6. Global Mood: Wall Street Edges Back Toward Record Highs
While China digests its own data, the global backdrop is surprisingly supportive.
On Wednesday in New York:
- The S&P 500 gained about 0.3%, the Dow Jones Industrial Average nearly 0.9%, and the Nasdaq Composite 0.2%, putting the S&P within 0.6% of its all‑time high. [20]
- US investors cheered a combination of weaker‑than‑expected private jobs data (seen as opening the door to a Fed rate cut next week) and stronger‑than‑forecast services‑sector figures that suggested inflation pressures are easing without a hard economic landing. [21]
- Earlier in the week, a Reuters market wrap noted that US stocks logged their sixth gain in seven sessions, with tech bellwethers like Apple, Nvidia and Microsoft leading and futures pricing putting the probability of a December Fed cut at nearly 90%. [22]
For Asian markets, a Wall Street that is drifting near record highs while bond yields edge down is typically a tailwind, especially for high‑growth and tech names – unless domestic worries (like China’s PMIs and property) dominate.
7. Pockets of Resilience: Small‑Business Credit and Services Trade
It’s not all gloom inside the Chinese macro data.
New figures highlighted by Xinhua and China Daily show that between 2021 and 2025, “inclusive finance” loans to small and micro firms have grown at an average annual pace above 20%. As of end‑October 2025: TS2 Tech
- Outstanding inclusive loans to such firms reached 35.77 trillion yuan.
- The average interest rate on new inclusive loans was about 3.48%, roughly 2 percentage points lower than at the end of the previous Five‑Year Plan.
Separately, Ministry of Commerce data indicate that China’s trade in services rose 7.5% year‑on‑year in the first ten months of 2025 to around 6.58 trillion yuan, with: TS2 Tech
- Service exports up 14.3%,
- Service imports up 2.6%, and
- A narrowing services trade deficit, helped by strong growth in knowledge‑intensive services and a rebound in travel‑related trade.
These data points support Beijing’s narrative that services and higher‑value activities are gradually taking a bigger role, even as goods exports and property remain under strain.
Equity angles:
- Smaller lenders with a focus on inclusive finance, fintech platforms serving SMEs, and services‑oriented sectors (travel, IT services, logistics) could draw support from these trends.
- Investors may still treat them cautiously given broader macro risks, but the growth backdrop is more favourable than headlines about PMIs or property suggest.
8. Regulatory Signals: Crypto, Stablecoins and Financial Stability
One under‑the‑radar story that could matter for a subset of Chinese equities is a fresh crackdown on crypto‑related activity.
According to Caixin reporting summarised by TS2:
- The PBOC recently chaired a high‑level coordination meeting with law‑enforcement, judicial and cyberspace authorities focusing on virtual‑currency trading and speculation.
- Officials reiterated that cryptocurrencies have no legal status in China, and singled out stablecoins as a growing risk after high‑profile fraud cases allegedly caused tens of billions of yuan in losses. TS2 Tech
This move dovetails with broader efforts to channel liquidity into “real‑economy” lending, while clamping down on shadow finance and speculative vehicles.
On Wednesday, A‑share segments tied to “stablecoin concept,” blockchain and high‑performance computing were among the notable losers, suggesting that traders are already pricing in a stricter regulatory climate. [23]
9. How Strategists Are Positioned on Chinese Equities
Despite the latest wobble, global strategists remain divided but increasingly engaged with China.
- A Reuters “slow‑motion rally” feature, echoed by multiple outlets, notes that mainland and Hong Kong benchmarks have staged a significant recovery in 2025: the CSI 300 is up roughly mid‑teens in percentage terms year‑to‑date, while the Hang Seng has climbed on the order of 30%, even after recent pullbacks. Valuations for Chinese stocks sit around 12 times forward earnings, a discount to many developed markets. [24]
- Flows data in that report show inflows into industrial and “old‑economy” ETFs, with some outflows from high‑growth STAR‑board tech names – consistent with the recent rotation visible in sector performance. [25]
On the more cautious side:
- An Investing.com summary of research from BCA Research says Chinese stocks are likely to experience heightened volatility in the coming months, given unresolved property risks, local‑government debt, and geopolitical uncertainties, even if valuations look attractive on paper. [26]
On the more bullish side:
- In a late‑November note that still informs current positioning, JPMorgan upgraded Chinese equities to “overweight”, arguing that cheap valuations, AI innovation and governance reforms tilt the risk‑reward positively into 2026. That call, reported broadly and dissected in a TS2 piece, emphasised that global investors’ underweight positions leave room for incremental inflows if policy support stays credible. TS2 Tech
Bottom line for sentiment:
- Valuations and positioning are supportive, but macro and policy headlines dictate the day‑to‑day tape.
- Thursday’s session will be another test of whether the market treats weak PMIs and property headlines as a buying opportunity in a “slow bull,” or a reason to stay defensive into year‑end.
10. What to Watch Before the China Market Opens on 4 December 2025
Heading into Thursday’s A‑share open, here are the practical watchpoints for traders and news readers:
- Index Futures and Overnight ADR Moves
- Check moves in China ADRs and China‑focused ETFs in US trading (particularly those tracking tech and property), as well as any indication from CSI 300 futures, for early directional cues.
- Developers and Property‑Linked Banks
- China Vanke, other large developers, cement producers, home‑appliance makers and regional banks could remain under pressure or see relief rallies on any hint of new support measures or clearer restructuring frameworks. [27]
- High‑Beta Tech: AI, Chips, “Computing Power” and Lithium
- Wednesday’s sell‑off in AI, application‑software, computing‑power infrastructure and battery‑materials names may either extend (if investors continue de‑risking after big YTD gains) or reverse in sympathy with Wall Street’s tech‑driven strength. [28]
- Cyclical Winners: Coal, Metals and Industrials
- With PMIs soft but still above water and global demand holding up, coal, non‑ferrous metals and heavy industrials have outperformed. Watch whether this rotation holds or fades if growth worries intensify. [29]
- FX‑Sensitive Exporters and Foreign‑Debt Issuers
- A stronger yuan near 7.06 per dollar is supportive of foreign inflows but potentially challenging for exporters and heavily dollar‑indebted entities. Export‑oriented manufacturers, offshore bond heavyweights and Hong Kong‑listed mainland names could react notably to further CNY moves. [30]
- Bank and Insurance Stocks
- With inclusive‑finance lending growing and deposit rates quietly trending lower, financials are at the crossroads of policy support and margin pressure. Any new signals on LGFV restructuring, bond‑portfolio oversight or deposit‑rate guidance could move the big state banks and insurers. TS2 Tech+1
- Crypto-Linked and “Digital Finance” Themes
- After the latest coordinated meeting on virtual currencies, blockchain, crypto‑concept and some fintech names may continue to see headline‑driven volatility. TS2 Tech+1
- Incoming Policy Headlines
- Markets will scan state media and leaks around the upcoming Central Economic Work Conference and Politburo meetings for confirmatory signals on the 5% growth target, property measures, local‑debt management and further yuan guidance. [31]
- Northbound Stock Connect Flows
- While real‑time numbers will only be clear after the open, northbound flow direction (buying from Hong Kong into Shanghai/Shenzhen) remains a key barometer of foreign appetite for mainland risk.
Final Takeaway
Going into the 4 December 2025 open, the China stock market is caught between supportive global liquidity and stubborn domestic headwinds:
- PMIs show slowing momentum, especially in services and manufacturing.
- Property and local‑government debt remain the main sources of tail‑risk.
- The yuan’s steady appreciation and stronger global risk appetite are modest positives for equities.
- And valuations plus lighter foreign positioning leave room for further upside – but only if Beijing can convince investors it has a credible, targeted plan to manage the transition to slower, more sustainable growth.
As always, conditions can change quickly. This article reflects information available up to the end of trading on 3 December 2025.
Disclaimer: This article is for informational and news purposes only and does not constitute investment advice, a recommendation, or a solicitation to buy or sell any financial instruments. Always consider your own objectives and risk tolerance, and consult a qualified financial adviser if needed.
References
1. english.news.cn, 2. english.news.cn, 3. www.chinadailyhk.com, 4. www.asiafinancial.com, 5. chinaeconomicreview.com, 6. www.reuters.com, 7. www.asiafinancial.com, 8. www.reuters.com, 9. www.reuters.com, 10. www.asiafinancial.com, 11. www.asiafinancial.com, 12. www.nationthailand.com, 13. www.nationthailand.com, 14. www.nationthailand.com, 15. www.brecorder.com, 16. www.brecorder.com, 17. www.brecorder.com, 18. www.reuters.com, 19. www.tradingview.com, 20. www.latimes.com, 21. www.latimes.com, 22. www.reuters.com, 23. english.news.cn, 24. www.reuters.com, 25. www.reuters.com, 26. www.investing.com, 27. www.asiafinancial.com, 28. english.news.cn, 29. english.news.cn, 30. www.brecorder.com, 31. www.reuters.com
