China’s stocks pared weekly gains and the benchmark 10-year bond hit a record low as the global artificial intelligence (AI) stock bubble burst following the US Democrats’ landslide win in midterm elections.

The CSI 300 equity index fell 1.4 per cent, weighed down by AI-related shares. Hong Kong’s Hang Seng Index dropped 1.3 per cent. The yield on China’s 10-year sovereign bond touched an intraday low of 1.58 per cent, according to Bloomberg, spurred by investor demand for safe-haven assets and central bank rate reforms that were viewed as de facto easing.

Tech stocks plunged across Asia following a US$2.5 trillion Nasdaq rout in the US on concerns that Democratic wins in congressional and gubernatorial races will slow construction of AI data centres. The MSCI Asia Pacific Index fell about 4 per cent, Taiwan’s tech-heavy Taiex entered a bear market and South Korea’s chip-dominated Kospi plunged as much as 8.8 per cent, triggering a circuit breaker.

An AI slowdown could also create “severe economic headwinds” for China, given the nation’s reliance on technology exports to drive growth, according to Bloomberg Economics. Net exports contributed nearly 40 per cent of China’s economic expansion in the third quarter, fuelled by electronics used in building data centres.

“Weaker US demand could create a glut in the ancillary AI components that anchor China’s exports, undercutting its AI-dominated growth model,” Bloomberg economists led by Chang Shu wrote in a report.

Friday’s sell-off took the shine off a positive week for Chinese equities. The CSI index posted a weekly gain of 1.7 per cent, ending a record 12-week sell-off. The Hang Seng Index added 5.1 per cent for its best week in over a year. Stocks benefited from renewed government support, including new liquidity measures and national team buying, as well as bargain hunting after October routs drove down valuations.

China politics: The ruling Communist Party released a 17,000-word document adopted at last week’s fifth plenum, which included changes to promotion rules, a ban on local leaders demanding personal allegiance and a call for more party building in the tech sector (also see SCMP Plus Between the Lines). Former paramilitary force commander General Wang Ning was ousted from China’s top advisory body and ex-Politburo member Ma Xingrui was indicted on bribery charges. The plenum’s seating plan suggested which generals are now leading the country’s five theatre commands, filling vacancies left by the anti-corruption drive. In Hong Kong, jailed activist Joshua Wong Chi-fung received another 10-year sentence on national security charges.

US-China relations: Work on a possible trilateral meeting between the leaders of China, Russia and the US was “under way”, a Russian official told the Financial Times. The Democratic midterm landslide may boost Congressional scrutiny of US trade policy, without drastically reshaping the overall direction. China said it was open to buying more US agricultural goods once proposed tariff cuts under the US-China Board of Trade were implemented. Vice-Premier Ding Xuexiang pushed back against the “China-squeeze” trade narrative. The US sanctioned two Chinese businesses over sales to Cuba’s military. A record six US lawmakers of Chinese descent will be in Congress next year following the midterm elections.

Economy and finance: China’s central bank raised the foreign-exchange reserve requirement ratio for lenders to help cool the yuan’s advance. October manufacturing activity unexpectedly contracted and a private gauge of services activity dipped for the first time since July. Hong Kong’s economy grew 5.2 per cent in the third quarter, a 15th straight expansion. Mainland marriages fell 10 per cent in the first nine months of the year, damping the outlook for 2027 births.

Foreign outreach: President Xi Jinping called for a resumption of US-Iran peace talks as he met Oman’s Sultan Haitham bin Tariq. Foreign Minister Wang Yi told his Philippine counterpart that some politicians in the Southeast Asian nation had “smeared China”. Wang also told North Korean officials that China was ready to deepen ties. General Zhang Shengmin met Russian Defence Minister Andrey Belousov in his first engagement with a foreign official since joining the Politburo.

Business digest: China’s state planner blocked Japanese tech investor SoftBank’s US$5.4 billion acquisition of ABB’s robotics division. Hong Kong Exchanges posted its first profit decline in more than two years. China’s securities regulator ordered three Hong Kong initial public offering candidates to hand over additional tax documents. Wingtech rejected a restructuring proposal that would have ended its control of Dutch chipmaker Nexperia’s assets outside China. BYD and Geely Auto, China’s two biggest carmakers, posted their strongest monthly sales of the year. Contract chipmaker Hua Hong Grace announced an expansion into silicon photonics on AI demand.

Hong Kong finance: After-hours derivatives trading in Hong Kong will be extended as a step towards 24-hour dealing. The city also plans to start interbank tokenised gold trading. Vice-Premier He Lifeng pledged continued support for Hong Kong as a global financial hub as he delivered a keynote speech at the Global Financial Leaders’ Investment Summit. Chief Executive John Lee Ka-chiu said the city was rewriting its playbook with a pivot towards commodities, fintech and green finance.

Economic data: October inflation data due on Monday may show that consumer price increases in China slowed to 0.8 per cent from 0.9 per cent in September, based on economist estimates compiled by financial data provider Wind. Producer prices may jump 5.4 per cent year on year, the eighth straight increase. Trade numbers, due on Tuesday, are expected to show export growth cooling to 32.9 per cent in October from 36.3 per cent a month earlier. Import growth may be little changed at 30.8 per cent.

Cop31 Conference: China is likely to raise the issue of tariffs on green-energy technology at the UN’s Cop31 climate conference, which starts in Turkey on Monday. The country has said that the event should address climate finance for the developing world and the “new problem” of unilateralism and protectionism, an indirect criticism of US and EU trade policies. Vice-President Han Zheng will lead China’s delegation to the event, which coincides with the 10th anniversary of the Paris Agreement. The US will not send an official delegation after pulling out the agreement at the start of the year.

Founding father commemoration: Thursday marks the 160th anniversary of the birth of Sun Yat-sen, widely revered as the founder of modern China. Events will take place on both sides of the Taiwan Strait. President Xi is likely to give a speech as he made an address on the 150th anniversary a decade ago. A cross-strait row broke out this week after Taiwan banned officials from attending mainland events marking the occasion.

International relations: China-Japan tensions may be in the spotlight as a diplomatic row over Taiwan reaches the one-year mark. Saturday is the anniversary of Japanese Prime Minister Sanae Takaichi saying that conflict over Taiwan would constitute a “survival-threatening situation” justifying mobilisation of Japanese armed forces. Elsewhere, China’s Middle East envoy Zhai Jun may visit Gulf countries next week. He is due to visit Iran, Oman and Saudi Arabia in early-to-mid November, according to the foreign ministry. China will also offer its first yuan bond in Canada next week, underscoring closer ties between the two countries.

Food safety: Public consultation on revisions to China’s food safety law ends on Thursday. Planned changes include updates to product-labelling requirements for health foods and refinements to penalties. Businesses will also be encouraged to install smart surveillance systems so that authorities can conduct remote inspections.

HKMA job swap: Two deputy chief executives at the Hong Kong Monetary Authority will change roles on Monday under the de facto central bank’s succession strategy. Darryl Chan Wai-man will become head of the office managing the city’s HK$4.46 trillion (US$568 billion) foreign currency war chest. Howard Lee Tat-chi will take over Chan’s current role in monetary management.

11/11: Singles’ Day falls on Wednesday, capping a key season for China’s retailers. Promotions have run for weeks leading up to November 11, including for generative AI products. The shopping festival was originally a one-day event to celebrate being single. It has since grown into weeks-long phenomenon and an important barometer of domestic consumption.