Global Market: Chinese stocks slide as US-China optimism fades, tech shares tumble

China’s blue-chip stocks fell more than 2% on Monday, with the CSI300 hitting a one-year low as optimism surrounding last week’s US-China summit faded and investors turned their focus to economic imbalances and renewed geopolitical risks, according to a report by Reuters.

The CSI300 Index fell 2.2% by the lunch break, putting it on course for its steepest daily decline in five weeks and taking it to its lowest level since early September 2025. The Shanghai Composite declined 1.7%.

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Technology stocks led the selloff after the United States moved towards restricting the use of Chinese-made components in artificial intelligence data centres, adding to pressure on an already fragile market ahead of China’s week-long National Day holiday beginning October 1.

Shares of optical transceiver makers Eoptolink Technology and Innolight Technology came under heavy pressure. Eoptolink fell 7% in Shenzhen, while Innolight dropped about 9% in both Shenzhen and Hong Kong. The CSI 300 Telecommunication Services Index slid more than 6% to a two-month low, Reuters reported.

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China said on Monday that a two-month extension of its trade truce with the United States would give both sides time to assess the implementation of their economic and trade arrangements. The extension was among the key outcomes of last week’s meeting between Chinese President Xi Jinping and US President Donald Trump.

However, markets remained cautious about the durability of the improvement in bilateral relations. Reuters reported that analysts at OCBC Bank highlighted continued differences between the two countries over technology, security, trade and the broader framework of international governance.

The latest US legislative move reinforced those concerns. A bipartisan group of US lawmakers introduced legislation on Friday that would prevent the federal government from using Chinese-made components for sensitive systems involved in transmitting data at AI data centres.

The development particularly affected Chinese technology companies exposed to the global AI infrastructure supply chain, contributing to a broader selloff in technology-focused segments. China’s STAR Market, ChiNext and the small-cap CSI3000 Index each fell roughly 4%.

Investor sentiment was also weakened by fresh economic data. China’s industrial profit growth slowed in August, underscoring concerns over uneven economic conditions and persistent imbalances in the world’s second-largest economy.

Trading volumes remained subdued as investors reduced exposure ahead of the National Day holiday. Hong Kong stocks, however, gained 0.6%, with the market set to remain open during much of China’s Golden Week break.

The holiday period will also coincide with a series of potentially market-moving US economic releases, including inflation, employment and gross domestic product data. Investors will assess the figures for clues about the outlook for US interest rates, while continuing geopolitical tensions in the Middle East add another layer of uncertainty.

Xiangcai Securities expects risk aversion to remain elevated ahead of the extended holiday period, with trading likely to stay thin during the shortened week.

(Disclaimer: Recommendations, suggestions, views and opinions given by the experts are their own. These do not represent the views of The Economic Times)
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