### Chinese Markets Tumble as Trump's Potential Cabinet Picks Raise Alarm

Chinese markets experienced a significant downturn on Tuesday amid rumors that President-elect Donald Trump is considering two staunch critics of China for key positions in his administration. This news has caused widespread concern about a possible escalation in U.S.-China tensions, leading to a selloff in Chinese stocks and a notable drop in the yuan.

The Chinese yuan fell past 7.4250 against the U.S. dollar, its lowest level since early August. Stock markets in Shanghai and Hong Kong also took a hit. The Shanghai Composite Index declined by 1.39%, closing at 3,422, while the Shenzhen Component saw a 0.65% drop to 11,314. The Hong Kong Hang Seng Index had an even more challenging day, plunging 2.8%, or 580 points, to close at 19,847—a six-week low.

The market turmoil is largely attributed to Trump's rumored picks of Sen. Marco Rubio (R-FL) for Secretary of State and U.S. Rep. Mike Waltz (R-FL) for National Security Adviser. Both are known for their critical views on China, fueling fears of a more confrontational U.S. foreign policy. If confirmed, Rubio, who would be the first Latino to hold the position, has consistently pushed for tougher measures against China on issues ranging from trade to human rights.

Tuesday's market decline hit various sectors, particularly tech and insurance stocks in Hong Kong. Major Chinese companies like Meituan, Lenovo, China Life Insurance, and Semiconductor Manufacturing International saw their share prices fall between 5% and 8%. U.S.-listed Chinese firms also faced significant premarket losses, with Alibaba down 3.1%, PDD Holdings falling 2.8%, Baidu dropping 2.9%, and electric vehicle makers NIO and XPeng tumbling 4% and 6%, respectively.

This financial upheaval comes on the heels of weak credit data from China, further exacerbating investor anxiety. October's new loans from Chinese banks totaled just 500 billion yuan, falling short of the 700 billion yuan forecast and marking the lowest monthly credit growth in 15 years. These figures highlight the ongoing fragility of domestic demand in China.

Ed Yardeni, president of Yardeni Research, remarked, "China's economy remains weak. The government seems to lack the will, or the way, to stimulate consumer demand." He noted that the recent $1.4 trillion financing package announced by China will primarily address local government debt, casting doubt on its ability to spur economic growth.

Similarly, David Morrison, senior market analyst at Trade Nation, pointed to the market's negative reaction to the fiscal stimulus package revealed last week by the National People’s Congress (NPC), describing it as "underwhelming." He added that Trump's threats of significant tariff increases on Chinese exports to the U.S. are heightening market concerns.

Bank of America analyst Anna Zhou acknowledged the limited impact of recent policy measures but remained somewhat hopeful. "Weak loan growth for both households and corporates continues to underscore fragile domestic demand," she said. Zhou expects more policy measures to be implemented by 2025, which could stabilize demand and improve credit growth.