Chinese stocks just had their worst start to the year in nearly a decade as economic woes persist

• China's CSI 300 index had its worst start of a year since 2016.
• Investors are bracing for more economic pain for China in the new year.
• Traders will watch for more stimulus from Beijing and brace for the potential impact of US tariffs.

Stocks in China dropped sharply in the first trading session of 2025, marking the worst start to a year in close to a decade.

The benchmark CSI 300 index dropped 2.9% on Thursday. According to data from Bloomberg, it marks the sharpest one-day drop since 2016. The Hang Seng China Enterprises index also fell.

Investors started the year in retreat after disappointing manufacturing data dampened economic outlooks, even though the services and construction sectors beat expectations. Losses were compounded after the CSI 300 fell below its key 60-day moving average at the end of 2024, Bloomberg data showed.

Despite a new year, Chinese investors remain mired in economic uncertainty, with both ongoing and newer challenges looming over the market.

Since the country loosened COVID-19 restrictions in 2023, low domestic consumption, deflation, and high private sector and government debt have reigned over its economy. Some investors, accustomed to China's double-digit growth from the previous decade have had to readjust to annual GDP readings of around 5%.

Although stocks gained 15% last year, much of the rally came in the latter half of the year on hopes that Beijing would implement needed stimulus.

Since September, the government has introduced more forceful measures that have stirred up a recovery, such as looser monetary policy, more borrowing and spending initiatives, and support for the country's ailing property market. In the wake of these adjustments, the World Bank raised its growth forecast for China's economy in 2025 from 4.1% to 4.5%.

Still, investors remain in a wait-and-see mode for a more significant government push. Aside from weakening manufacturing data, China's consumer inflation hit a five-month low last month, while retail sales and trade figures all missed expectations.

Investors are bracing for deeper turmoil from US policy, as Donald Trump has pledged to impose tariffs of up to 60% on goods coming China.

According to Shuang Ding, Standard Chartered head of greater China economic research, a doubling of the tariff rate would reduce net export contributions to Chin'a GDP by about one percentage point.

"The government will have to find ways offset to offset that impact," he told Bloomberg TV. "I think it takes quite sizable stimulus, a stabilization of the housing market and improvement of the consumer sentiment to offset impact."