Chinese stocks and the yuan slipped on Thursday, despite the efforts of the authorities, as the gloom enveloping global markets overwhelmed signs that China's economy is not weakening as fast as some investors had feared.
China's central bank set a firmer mid-point rate for the yuan, signaling policymakers' determination to hold the line against expectations of a sustained depreciation of the currency, which nonetheless opened weaker.
Perceived mis-steps by the authorities had stoked concerns Beijing might be losing its grip on economic policy, just as the country looks set to post its slowest growth in 25 years.
Asian share markets weakened across the board on Thursday, hit by steep losses on Wall Street overnight as a rout in oil prices heightened worries about the global economy.
China's main stock indexes fell, with the Shanghai Composite Index .SSEC trading down 1.3 per cent and the CSI300 index .CSI300 off 1 per cent, below their September lows. Both are down more than 16 per cent for the year so far.
The Shanghai and Shenzhen stock exchanges said late on Wednesday that they have stepped up monitoring of selling by listed companies' major shareholders to ensure they are abiding by new rules designed to restrict such sales and prevent a build-up of selling pressure.
On Wednesday, China's December trade data beat forecasts and tempered some of the fears about the slowdown in the world's second-largest economy.
The better-than-expected performance of exports may have been helped by the depreciation of the yuan, which has fallen around 5 per cent against the dollar since August.
The People's Bank of China set the midpoint rate for the tightly managed currency at 6.5616 per dollar on Thursday, firmer than both the previous fix of 6.563 and Wednesday's closing quote 6.5743.
The spot market opened at 6.5800 per dollar and was changing hands at 6.5877 in early trade, 134 pips weaker than the previous close. The spot rate is allowed to deviate 2 per cent either side of the daily fix.
The central bank has also used aggressive intervention to engineer a huge leap in yuan borrowing rates in Hong Kong, essentially making it prohibitively expensive to short the currency.
The result has been to drag the offshore level of the yuan back toward the official level, closing a gap that had threatened to get out of control just a few days earlier.
The offshore yuan was trading 0.1 per cent below the onshore spot on Thursday at 6.5955 per dollar.