As mainland traders get ready for Friday’s session on December 5, 2025, China’s stock market is sitting at a delicate crossroads: domestic liquidity is being ramped up, the yuan is near a 14‑month high, property risks are still front and centre, and global risk appetite is being shaped by expectations of imminent US Federal Reserve rate cuts. [1]
Here’s a concise pre‑market brief on the key forces likely to drive the Shanghai, Shenzhen and Hong Kong markets at the open.
1. Where China and Hong Kong Stocks Closed on Thursday
Chinese equities ended Thursday, December 4, essentially flat at the index level but with sharp divergences under the surface.
- Shanghai Composite Index: closed around 3,875.79, down about 0.06–0.1%, marking a third straight day of losses. [2]
- Shenzhen Component Index: up 0.4% to 13,006.72. [3]
- CSI 300 blue-chip index: up about 0.3%, helped by cyclicals and selected growth names. [4]
- Hang Seng Index (Hong Kong): rose about 0.7% to 25,935.90, with the tech sub‑index up roughly 1.5%. [5]
Sector moves on Thursday underlined how split the market is:
- Losers: Liquor names (CSI Liquor Index -2%), consumer staples (about -1%), and property stocks (CSI 300 Real Estate Index -0.3%). [6]
- Winners: Semiconductor shares (CSI Semiconductor Index >+3%), robotics stocks (+2%), and broader AI‑linked names (AI index nearly +1%). [7]
This comes after Wednesday’s drop, when both the Shanghai Composite and CSI 300 fell about 0.5% and the Hang Seng slid 1.3%, as weak services data and renewed worries about China Vanke’s liquidity stress weighed on sentiment. [8]
Takeaway for the open: Expect two-way trading at the open, with pressure lingering on consumer and property plays, while chip, industrial and AI names continue to attract rotational inflows.
2. Big Signal from the PBoC: 1 Trillion Yuan Reverse Repo
The most important fresh domestic policy signal before Friday’s open is from the People’s Bank of China (PBoC).
- On Thursday evening, the central bank said it will conduct a 1‑trillion‑yuan (about US$141bn) outright reverse repo operation on Friday, with a three‑month (91‑day) tenor, via interest‑rate bidding. [9]
- These outright reverse repos, introduced in October 2024, have become a regular monthly tool to manage banking system liquidity alongside traditional repos and bond operations. [10]
The explicit objective is to “maintain ample liquidity” in the banking system heading into year‑end. In practice, that means:
- Short‑term funding stress for brokers and banks should be limited.
- The move may anchor money‑market rates, helping risk assets if investors read it as another sign that policy will stay supportive, not restrictive, through the Central Economic Work Conference (CEWC) later this month. [11]
What to watch at the open
- How aggressively brokers and leveraged funds add index futures or margin positions on the back of improved liquidity.
- Whether small‑cap and growth names outperform, as they tend to be more sensitive to funding conditions.
3. Yuan Strength and FX Intervention: A New Constraint for Bulls
The yuan has quietly become a key macro driver for China‑related trades.
- The currency is up around 3.3% against the US dollar year‑to‑date, on track for its biggest annual appreciation since 2020. [12]
- Earlier this week, the yuan briefly hit a 14‑month high, before easing after FX headlines. [13]
According to Reuters, major state‑owned banks have been buying dollars in the onshore market and holding them, instead of recycling them via swaps as usual. This unusual pattern appears aimed at:
- Slowing the yuan’s rise rather than reversing it.
- Tightening dollar liquidity, making it more expensive to maintain long‑yuan positions (back-end USD/CNY swap points dropped as the negative carry deepened). [14]
At the same time, ING expects the PBoC’s currency‑stability bias to continue in 2026, with USD/CNY likely to stay in a relatively narrow 6.90–7.30 band, after this year’s de‑facto 7.00–7.40 range held surprisingly well. [15]
Implications for Friday
- A too‑strong yuan can hurt exporters and offshore earnings, but continued stability may support foreign interestin A‑shares and Chinese bonds. [16]
- Exporters, tech hardware and autos with large foreign sales could see short‑term profit‑taking if traders think the FX tailwind has peaked.
4. Macro Check: PMIs, Prices and a Fragile Exit from Deflation
Recent data up to December 4 give a mixed but slightly improving picture of China’s real economy.
November PMIs – Still Below 50, But Less Bad
The official November Purchasing Managers’ Index (PMI), released earlier this week, shows:
- Manufacturing PMI: 49.2, up 0.2 pts from October’s 49.0 – still in contraction territory but with modest improvement in business conditions. [17]
- Non‑manufacturing business activity index: 49.5, down 0.6 pts from October (50.1), signalling slower services momentum. [18]
- Composite PMI Output Index: 49.7, slightly below October and just under the 50 expansion line. [19]
The National Bureau of Statistics (NBS) noted that manufacturing sentiment improved marginally, driven by production and orders, while services growth cooled. [20]
Prices of Key Production Goods: Disinflation, Not a Surge
Fresh NBS data on “Market Prices of Important Means of Production” for November 21–30 show:
- Among 50 tracked products, 15 prices rose, 30 fell, and 5 were unchanged vs mid‑November. [21]
- Construction steel products like rebar and wire saw roughly 0.9–1.2% MoM gains, while many petrochemical and gas items, including LNG and polypropylene, fell around 1% or more. [22]
That pattern – isolated strength in some industrial commodities, broader softness elsewhere – is consistent with continued disinflationary pressure.
CPI and FX Reserves: Gradual Stabilisation
- Consumer inflation turned positive in October, with headline CPI at +0.2% YoY after -0.3% in September, suggesting a fragile exit from outright deflation. [23]
- Foreign exchange reserves rose US$4.7bn in October to US$3.343 trillion, pointing to a stable external positiondespite tariffs and trade tensions. [24]
And importantly for today’s session, macro watchers expect no major new data releases on December 5 itself. Several sell‑side outlooks note that the week of December 1–5 is relatively quiet on the data front, with PMIs and industrial profit figures already released. [25]
Market angle: The macro backdrop is “less bad” rather than clearly strong. That tends to favour stock‑picking over index‑level trend trades at the open.
5. Growth Target Debate: 2025 in Sight, 2026 in Focus
Policy expectations around the upcoming Central Economic Work Conference and the 15th Five‑Year Plan (2026–2030) are central to how investors are framing China risk.
5% Growth for 2026 Looks Likely
Reuters reports that most government advisers advocate keeping an “around 5%” GDP growth target for 2026, matching 2025’s target. [26]
Key points from that reporting:
- The aim is to start the new five‑year plan on a strong footing and break a deflationary spell that has dragged on growth. [27]
- Advisers see scope for a budget deficit around or slightly above 4% of GDP, following this year’s record 4% deficit, with continued front‑loaded government bond issuance in 2026. [28]
- The widely used consumer‑goods “trade‑in” subsidy (roughly 300 billion yuan this year) is expected to continue in 2026, potentially shifting focus from goods toward services. [29]
- Morgan Stanley estimates the GDP deflator may not turn positive until 2027, meaning deflationary pressures could persist for at least two more years. [30]
External Analysts: Slightly More Cautious
Recent external forecasts released this week add nuance:
- BBVA Research raised its 2025 GDP forecast to 5.0% (from 4.8%), aligning with Beijing’s target, but kept 2026 at 4.5%, citing domestic headwinds like the housing crash, overcapacity and weak sentiment, and warning that these have replaced tariffs as the main drag on growth. [31]
- ING’s “Asia 2026: 10 questions for China’s year ahead” expects around 5% growth in 2025 but a slowdown to about 4.6% in 2026, flagging weak domestic confidence, contracting fixed‑asset investment and a still‑troubled property sector, even as exports stay resilient. [32]
Why this matters for Friday
- Equities sensitive to policy support – infrastructure, banks, local‑gov financing plays, and consumer subsidy beneficiaries (autos, appliances, electronics) – remain tightly tied to expectations that Beijing will keep pushing for ~5% growth. [33]
- Any leaks or rhetoric ahead of the CEWC hinting at more aggressive consumer‑oriented stimulus or additional property support could be a catalyst for a late‑session swing.
6. Property: Still the Biggest Overhang
If there is one sector that can swing the entire market at the open, it’s real estate.
Prices: New Homes Stabilising, Resale Market Still Sliding
A private survey published on December 1 shows:
- New home prices rose 0.37% MoM in November (vs 0.28% in October).
- Resale (secondary) home prices fell 0.94% MoM, a deeper drop than October’s 0.84% decline. [34]
The survey, by China Index Academy, underscores that while developers are managing to stabilise new‑build prices, the secondary market remains under heavy pressure thanks to high inventories and cautious buyers. [35]
Vanke and the Fifth Year of the Slump
This week’s trading has been dominated by news around China Vanke, once a flagship developer:
- Fitch Ratings has placed Vanke on “Rating Watch Negative” after the company sought to delay payment on an onshore bond, deepening concerns about its liquidity. [36]
- Vanke’s Shenzhen shares are at their lowest since 2006, and the CSI 300 Real Estate Index fell about 2.1% on Wednesday, with the Hang Seng Mainland Property Index down roughly 1.5%. [37]
- Nomura’s chief China economist, Lu Ting, expects the property sector, which peaked in mid‑2021, to continue sliding through 2026, making it one of the biggest drags on growth next year. [38]
Market angle for the open
- Developers, banks, brokerages and local SOEs with property exposure are likely to remain under pressure.
- Any sign – rumoured or real – of incremental property easing (mortgage rules, purchase caps, funding channels) will be traded aggressively given how central property is to the macro narrative.
7. Foreign Investors, Valuations and the “Slow‑Motion Rally”
Despite this week’s wobble, China’s equity market has quietly staged a solid 2025 rally, especially compared with US peers on a valuation‑adjusted basis.
A recent Reuters feature on China’s “slow‑motion stock rally” highlights:
- The CSI 300 has gained roughly 16% year‑to‑date, roughly in line with the S&P 500.
- The Hang Seng Index is up about 30% and on track for its best year since 2017. [39]
- Both the Shanghai Composite and Hang Seng trade at about 12x earnings, compared with 28x for the S&P 500and around 21x for Japan’s Nikkei and Europe’s FTSE 100, according to LSEG data. [40]
Portfolio managers quoted in those pieces emphasise several themes:
- A “gradual reallocation” by foreign investors back into China, helped by state support, improved corporate governance and big gains in AI‑linked stocks after the launch of the DeepSeek chatbot. [41]
- Strong ETF inflows into cyclical sectors – battery, chemicals, steel – even as tech‑heavy STAR 50 Index funds see net outflows, reflecting caution on more volatile growth names. [42]
- Investors increasingly distinguish between “old China” (exporters and developers facing headwinds) and “new China” (AI, biotech, advanced manufacturing), with the latter driving much of the earnings optimism. [43]
For Friday’s open
- Valuation‑driven dip‑buying remains a powerful narrative: with China trading at a steep P/E discount to the US, every pull‑back tends to attract global allocators looking beyond the US “Magnificent 7”. [44]
- That said, short‑term sentiment will hinge on property headlines, FX moves and any fresh regulatory surprises.
8. External Backdrop: Fed Hopes, Global Stocks and Trade Narratives
China’s open on Friday is also shaped by overnight moves in global markets.
- On Wednesday (US time), the Dow, S&P 500 and Nasdaq closed higher (+0.86%, +0.30%, +0.17%respectively) after ADP employment and ISM services data kept hopes for a Fed rate cut next week alive. [45]
- By Thursday, global shares and the dollar were mostly higher, as traders continued to position for Fed easing in 2026, even after strong US jobless‑claims data muddied the exact timing and pace of rate cuts. [46]
For China, this global backdrop matters in three ways:
- Risk appetite: Higher global equities and improving risk sentiment support flows into emerging‑market and China funds, especially with Chinese valuations looking relatively cheap. [47]
- Rates and bonds: Rising global yields and improving risk appetite have pushed China’s 10‑year government bond yield to around a three‑week high near 1.86%, according to TradingEconomics, which can slightly dampen bond prices but support bank margins. [48]
- Trade and commodities: Reports that Brazil’s November soy exports to China jumped 64% ahead of a possible shift in Chinese buying patterns underscore how trade diversification is reshaping commodity flows – a structural issue for Chinese agribusiness and shipping names. [49]
9. Sector‑Specific Catalysts: Tech, Rare Earths and Energy Storage
Beyond the big macro themes, several sector‑level stories from December 4–5 may influence Friday’s open.
Tech and Chips
- AMD’s CEO said the company is ready to pay a 15% US tax on AI chip shipments to China (specifically its MI 308 series), under an August agreement that allows limited exports in exchange for the fee. [50]
- Hikvision has filed a legal challenge against an expanded US FCC crackdown on Chinese telecom and surveillance gear, arguing the regulator exceeded its authority by retroactively targeting previously approved equipment. [51]
- A separate Reuters piece and other coverage highlight ongoing scrutiny of Chinese apps and platforms, including a planned one‑year ban on Xiaohongshu in Taiwan over fraud concerns, and recent remarks by Xi Jinping about “resolutely cracking down” on online misconduct to keep cyberspace “clean”. [52]
Together, these stories underscore that:
- Export‑oriented hardware and AI names remain exposed to US policy risk, even as some chip exports resume under new frameworks.
- Platform and surveillance companies face a regulatory overhang in multiple jurisdictions.
Rare Earths and Advanced Manufacturing
China is also quietly tweaking its rare earths regime, with clear implications for EVs, defence and high‑tech supply chains:
- Asia Financial reports that China has issued the first batch of new “simpler” year‑long rare earth export licences, granting “general licences” to several auto suppliers to reduce bottlenecks and streamline export approvals. [53]
- A follow‑up article notes that Beijing plans to approve rare earth licences for “civilian use”, while keeping tighter control on exports to defence and sensitive tech sectors, reinforcing its leverage in the global rare‑earth power play. [54]
These moves could:
- Support upstream rare‑earth producers and selected EV‑supply‑chain stocks, which benefit from clearer export rules.
- Maintain a strategic policy lever that Beijing can use in broader trade negotiations.
Energy Storage and Green Tech
- The 2025 China Energy Storage CEO Summit is running December 4–5 in Xiamen, highlighting opportunities in battery storage and grid‑level solutions. [55]
- Local media reports cited by Asia Financial say some key material suppliers to lithium battery makers have raised prices thanks to booming demand and Beijing’s push against “excessive competition” and price wars in new‑energy sectors. [56]
This backdrop keeps energy‑storage, battery, and related materials stocks squarely on traders’ watchlists at the open.
10. Key Things for Traders and Investors to Watch at Today’s Open
Putting it all together, here are practical focal points for the China market open on Friday, December 5, 2025:
- Reaction to the 1‑trillion‑yuan reverse repo
- Does onshore funding ease meaningfully?
- Do brokers and leveraged funds rotate back into small caps, growth and cyclicals? [57]
- Yuan and bond yields at the open
- If the yuan continues to firm, exporters and offshore earners may lag, while financials and domestically oriented plays could benefit from capital inflows and stability. [58]
- Property names and their lenders
- Watch Vanke, other developers, property ETFs and bank stocks for further reaction to rating‑watch headlines and the still‑weak secondary housing market. [59]
- Sector rotation between “old” and “new” China
- Industrial, chemicals, steel, batteries and logistics stocks may continue to attract flows, while legacy property and traditional export names lag. [60]
- Tech, AI and chip supply news‑flow
- Any new detail on AI chip export licences, US restriction challenges, or domestic regulatory initiatives around Android ecosystems and online content could swing large‑cap tech and hardware. [61]
- Global risk tone during the session
- With Fed expectations still supportive and global shares mostly higher, any incremental good news out of China could produce outsized moves in high‑beta names. Conversely, a negative property or regulatory surprise may be amplified if global markets turn risk‑off intraday. [62]
Final Note
This pre‑open briefing summarises publicly available news, forecasts and analyses published around December 4–5, 2025 from official Chinese sources, global newswires and major research houses. It is for information purposes only and does not constitute investment advice or a recommendation to buy or sell any security.
References
1. www.reuters.com, 2. english.news.cn, 3. english.news.cn, 4. indopremier.com, 5. indopremier.com, 6. indopremier.com, 7. indopremier.com, 8. www.asiafinancial.com, 9. english.www.gov.cn, 10. english.www.gov.cn, 11. www.reuters.com, 12. www.reuters.com, 13. www.reuters.com, 14. www.reuters.com, 15. think.ing.com, 16. www.reuters.com, 17. www.stats.gov.cn, 18. www.stats.gov.cn, 19. www.stats.gov.cn, 20. www.stats.gov.cn, 21. www.stats.gov.cn, 22. www.stats.gov.cn, 23. tradingeconomics.com, 24. tradingeconomics.com, 25. www.lundgreensinvestorinsights.com, 26. www.reuters.com, 27. www.reuters.com, 28. www.reuters.com, 29. www.reuters.com, 30. www.reuters.com, 31. www.bbvaresearch.com, 32. think.ing.com, 33. www.reuters.com, 34. www.reuters.com, 35. www.reuters.com, 36. www.asiafinancial.com, 37. www.asiafinancial.com, 38. www.asiafinancial.com, 39. www.reuters.com, 40. www.reuters.com, 41. www.reuters.com, 42. www.reuters.com, 43. www.reuters.com, 44. www.reuters.com, 45. www.reuters.com, 46. www.marketscreener.com, 47. www.reuters.com, 48. tradingeconomics.com, 49. www.reuters.com, 50. www.reuters.com, 51. www.reuters.com, 52. www.reuters.com, 53. www.asiafinancial.com, 54. www.asiafinancial.com, 55. en.cnesa.org, 56. www.asiafinancial.com, 57. english.www.gov.cn, 58. www.reuters.com, 59. www.asiafinancial.com, 60. www.reuters.com, 61. www.reuters.com, 62. www.marketscreener.com
