China stocks, yuan set to rise as Trump delays tariffs

SHANGHAI/HONG KONG, Jan 21 (Reuters) - China stocks were expected to open higher on Tuesday while the onshore yuan was likely to strengthen, as U.S. President Donald Trump's inaugural policies reinforced optimism that he will treat China less harshly than markets had feared.

Trump returned to the White House on Monday with an ambitious agenda spanning trade reform, immigration, tax cuts and deregulation, but stopped short of taking aggressive tariff action, sparking a relief rally in global stocks and a drop in the dollar.

Trump didn't target China in his inauguration speech nor did he immediately impose tariffs as previously promised. Instead, he directed federal agencies to "investigate and remedy" persistent U.S. trade deficits and unfair trade practices and currency manipulation by other countries.

"Previously, Trump was seen as dreadful. So once you see policies are less severe than thought, it's good news to China assets," said Yuan Yuwei, founder and CIO of Water Wisdom Asset Management, calling Trump's return "marginally positive".

Yuan also expects Trump to be less stringent in his crackdown against China than his predecessor Joe Biden, who "sought to strangle China to death."

China's blue-chip CSI300 Index .CSI300, which has dropped roughly 5% since Trump won the election on Nov. 5 with a threat to impose steep tariffs of 60% on Chinese goods, has already rebounded over the past week amid gestures of goodwill between Beijing and Washington.

China's yuan CNY=CFXS, which had weakened roughly 3% against the dollar since Trump's victory, rebounded 0.3% on Monday to the strongest level in two weeks, buoyed by a friendly call between Trump and Chinese President Xi Jinping.

(Reporting by Shanghai and Hong Kong newsroom
Editing by Shri Navaratnam)

((samuel.shen@thomsonreuters.com; +86 21 20830018; Reuters Messaging: samuel.shen.thomsonreuters.com@reuters.net))