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Staff of Reuters 3 Minutes to Read (Reuters) – SHANGHAI, July 13 – After two days of advances, Chinese stocks closed the day more than 1% lower on Wednesday, as optimism about Beijing’s policy easing faded and escalating Sino-US tensions weighed on sentiment. ** The Shanghai Composite Index sank 1.1 percent to 3,528.50, while the blue-chip CSI300 index fell 1.2 percent to 5,083.08. ** The central bank’s surprise drop in banks’ minimum reserve ratio (RRR) published late Friday boosted mainland Chinese stocks earlier this week. On Tuesday, the People’s Bank of China said the move had not changed its conservative monetary policy stance. ** Ting Lu, Nomura’s Chief China Economist, stated that the 50-basis-point RRR decrease and fiscal stimulus “are unlikely to be adequate to reverse the growth downtrend, since the drag from the slowing property sector is too strong to fully counterbalance.” ** The US administration reiterated its warnings to firms on Tuesday about the growing dangers of having supply chain and investment ties to China’s Xinjiang province, citing forced labor and human rights violations there. ** Bill Witherell, chief global economist at Cumberland Advisors, said, “I am waiting for any hint that a serious correction is coming.” “It’s possible that deteriorating China-US financial relations will spark one.” ** Lynda Zhou, a Shanghai-based Fidelity International fund manager, expects greater volatility in China’s onshore stock market, but warns against the detrimental impact of predicted US tapering. ** As government initiatives to lower real lending rates and sluggish economic growth imperil lenders’ profitability, the CSI 300 banking index fell 1.7 percent to its lowest level in six months. ** Profit-taking in China’s new energy industry caused a drop of nearly 3%. BYD, an electric vehicle manufacturer, fell 7.5 percent. ** China’s property stocks fell further as Beijing signaled that it will continue to tighten its grip on the sector. “Markets may misjudge the amount of hardship suffered in the property sector,” said Nomura’s Lu. (Shanghai Newsroom contributed reporting; Rashmi Aich edited the piece.)/nRead More

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