Chinese Stocks Defy Biden's Auto Import Ban Concerns, Rally To 4-Month Highs As Central Bank Unexpectedly Slashes Interest Rates

Chinese stocks surged to their highest levels in four months on Monday, following the People’s Bank of China’s (PBoC) slashing a key interest rate.

The surprise move reignites hopes for additional stimulus in the world’s second-largest economy.

The iShares China Large-Cap ETF (NYSE:FXI) — which tracks major Chinese firms like Alibaba Group Holding Limited (NYSE:BABA), Tencent Holding Ltd. (OTCPK: TCEHY), JD.com Inc. (NASDAQ:JD), and Baidu Inc. (NYSE:BIDU) — is up more than 2% as of 11:20 a.m. ET in New York. It’s a level not seen since late May.

PBoC Cuts Rates, Inject Liquidity

On Sept. 23, the People’s Bank of China unexpectedly reduced the 14-day reverse repurchase rate by 10 basis points to 1.85%, down from 1.95%.

Additionally, the central bank injected CNY 74.5 billion ($10.2 billion) of liquidity into the banking system through this operation, according to an official statement. The PBoC also pumped CNY 160.1 billion via seven-day reverse repos, maintaining the rate at 1.7%.

These measures come on the heels of the central bank's decision last week to keep key lending rates at record lows, following surprise cuts in July.

Monday’s policy moves in China are likely seen as part of broader efforts to stimulate consumption ahead of the National Day Holiday, a week-long break that starts on Oct. 1.

Market Reactions

Chinese ADRs (American Depository Receipts) rallied sharply in response, outpacing broader market gains.

Other Chinese-linked ETFs made moves Monday:

• Kraneshares CSI China Internet ETF (NYSE:KWEB) was up 2%





• iShares MSCI China (NASDAQ:MCHI), up 1.7%





• Invesco China Technology ETF (NYSE:CQQQ) up1.6%.

On the same day, the U.S. Commerce Department proposed a ban on the import and sale of Chinese-made vehicles equipped with automated driving systems and critical communications software and hardware due to national security concerns.

This ban is scheduled to take effect in 2027.

Electric vehicle (EV) manufacturers like Shanghai-based NIO Inc. (NYSE:NIO) and Guangzhou, China-based Xpeng Inc. (NASDAQ:XPEV) also joined the broader country stock rally despite the potential negative challenges from the new regulation.

Monday’s Movers Among Largest Chinese Stocks

Name	Market Cap	1-Day %
Alibaba Group Holding Limited	$210.26B	2.44%
NetEase, Inc. (NASDAQ:NTES)	$ 52.23B	2.59%
JD.com, Inc.	$ 43.60B	4.19%
Baidu, Inc.	$ 31.10B	3.00%
Li Auto Inc.	$ 22.26B	3.55%
DiDi Global Inc.	$ 19.42B	0.75%
KE Holdings Inc. (NYSE:BEKE)	$ 18.20B	5.60%
ZTO Express (Cayman) Inc.	$ 17.43B	-0.9%
Tencent Music Entertainment Group (NASDAQ:TME)	$ 16.34B	4.44%
Yum China Holdings, Inc. (NYSE:YUMC)	$ 13.85B	2.38%
NIO Inc.	$ 11.53B	3.13%

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