China’s A-share Market Suffers Heavy Blow, Creating the Biggest Decline of the Year.

On April 7, 2025, President Trump of the United States introduced a policy of “reciprocal tariffs”, causing the Chinese authorities to immediately announce retaliatory measures, escalating tensions between China and the U.S. The A-share market in China suffered a heavy blow on Monday, April 7th, with the Shanghai Composite Index plummeting by 4.46% at the opening, the Shenzhen Component Index falling by 5.96%, and the Growth Enterprise Index plummeting by 6.77%, marking the largest single-day drop of the year so far and heightening market panic.

The sharp drop in the Chinese stock market on April 7th was seen as a direct response to the escalation of conflict between China and the U.S. The Shanghai Composite Index opened at 3193.10 points, down by 4.46%, while the Shenzhen Component Index opened at 9747.66 points, down by 5.96%. The Growth Enterprise Index opened at 1925.64 points, down by 6.77%. The CSI 300 opened at 3675.20 points, down by 4.82%. The Kechuang 50 Index opened at 960.49 points, down by 5.66%. The CSI 500 opened at 5523.96 points, down by 5.50%, and the CSI 1000 opened at 5811.54 points, down by 6.31%.

At 9:38 am Beijing time on the 7th, the Shanghai Composite Index fell by over 5%, the Growth Enterprise Index plummeted by over 8%, the Beichuhe 50 Index dropped by over 11%, and nearly 3000 stocks in the Shanghai, Shenzhen, and Beijing markets fell by over 9%.

Hong Kong stocks and Chinese concept stocks listed in the United States had already experienced significant declines, reflecting shaken investor confidence.

Since the beginning of the year, the U.S. has imposed a total of 54% tariffs on Chinese goods, with an average weighted tariff as high as 66%, reaching a historical high. Financial institutions such as Morgan Stanley and Nomura believe that the intensity of this wave of tariff impact has surpassed the trade war between 2018 and 2019, posing a substantial threat to China’s exports and employment. Coupled with the U.S. plan to cancel the tax-free policy for parcels under $800, small and medium-sized exporters in China are further hit.

The Chinese official announcement stated that starting from April 10th, they will impose a 34% tariff on American goods in retaliation. Instead of negotiation, China chose to confront. The World Journal interprets that under the downward pressure on the economy, Beijing has no other choice but to hold out. The market is concerned that this will trigger further retaliation between China and the U.S., leading to a domino effect of supply chain shifts and foreign capital withdrawals.

Although China has recently released signals of “stabilizing expectations” and “attracting foreign investment”, the actual policy space is limited. Economists believe that without repairing its economic and trade relationship with the U.S., and without rejuvenating consumer confidence, the Chinese economy may fall into long-term stagnation.