More on China.

The tightly controlled yuan has weakened to its lowest level in 16 months while China’s blue-chip stock slipped, and has lost 4.1% so far this year. The currency has had a rocky ride, with two weeks to go until Donald Trump becomes US president. He has threatened big US tariffs on Chinese imports.

Chinese authorities have introduced a number of measures to support the yuan, such as swap and relending schemes totalling 800 billion yuan to shore up investor confidence. The threat of US tariffs along with worries about China’s sluggish economic recovery have triggered capital outflows.

The People’s Bank of China could issue more yuan bills in Hong Kong, state-owned news outlet Yicai reported on Monday. Financial News, a central bank publication, said the PBOC has the tools and the experience to respond to the currency’s depreciation.

Charu Chanana, chief investment strategist at Denmark’s Saxo Bank, said:

The decision to allow the yuan to weaken last week has heightened concerns about capital outflows, further dampening investor sentiment.

Preventing a sharp decline of the yuan will be crucial for China’s recovery. Any tactical recovery this year will need more than just stimulus measures, particularly whether China can negotiate a deal with president-elect Trump.

The Shanghai and Shenzhen stock exchanges have held meetings with foreign investors, to assure them they would continue to open up China’s capital markets, the two bourses said on Sunday night.

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Confidence among British businesses has plummeted to the lowest levels since ex-prime minister Liz Truss’s mini-budget in September 2022 following the autumn budget’s large tax increases.

A survey of nearly 5,000 firms from the British Chambers of Commerce showed concerns over taxation were the highest since 2017, while confidence about sales over the next 12 months was the lowest since late 2022.

The BCC’s director general Shevaun Haviland said:

The worrying reverberations of the budget are clear to see in our survey data. Businesses confidence has slumped in a pressure cooker of rising costs and taxes.

The chancellor, Rachel Reeves, announced £40bn of tax rises on 30 October, with a big burden on businesses, who will have to pay higher social security charges from April, along with a higher national minimum wage.

While the Bank of England estimates that higher public spending will temporarily boost growth next year, the tax rises are also expected to push up inflation slightly.

The BCC said 55% of firms plan to raise prices, up from 39% the quarter before, while 24% intend to scale back investment, up from 18% previously.

Growth in the UK economy picked up in the first half of 2024 as it recovered from a shallow recession in late 2023, but flatlined in the third quarter. The Bank of England has forecast zero growth for the fourth quarter, and an expansion of 1.5% in 2025.

In China, services growth has risen to a seven-month peak, according to a closely-watched survey.

The Caixin purchasing managers’ index (PMI) rose to 52.2 in December from 51.5 in November, signalling the strongest growth in the service sector since May, as new orders accelerated, despite a fresh fall in exports. Confidence remained upbeat despite higher cost pressures.

However, authorities are struggling to prop up the yuan, which has fallen to a 16-year low amid concerns about the economy and US tariffs.

Chinese stocks slipped on Monday, with the benchmark CSI 300 index down by 0.16%, as the country’s two biggest stock exchanges said they met foreign investors over the weekend.

The Shanghai and Shenzhen stock exchanges both held weekend symposiums with foreign investors “to solicit opinions and suggestions on the recent A-share market situation,” referring to shares from companies in mainland China that trade on the two stock exchanges.

The Shenzhen Composite index fell by nearly 0.4% on Monday, while the SSE Composite (stocks that are traded at the Shanghai Stock Exchange) edged 0.14% lower.

The South Korean Kospi led gains in Asia, rising by 2.3%, despite political turmoil in the country. Police will consider arresting members of the presidential security service if they try to block investigators, in an attempt to execute an arrest warrant for impeached president Yoon Suk Yeol, according to the Yonhap news agency and Reuters.

The Agenda

• 9am GMT: Eurozone HCOB PMI composite and services final for December

• 1pm GMT: Germany inflation for December

• 2.45pm GMT: US S&P Global composite and services PMIs final for December

• 3pm GMT: US Factory Orders for November