China is facing challenges in stabilizing its stock market as pressure mounts on the yuan due to record dividend payouts by companies listed in Hong Kong.
Interim dividend payouts are expected to reach $12.9 billion in the first quarter of 2025, following a record high of $16.2 billion in the fourth quarter, marking a 47% increase compared to the previous year.
These payouts have been boosted by China's capital market reform plan but have negatively impacted the Chinese currency. Companies rely on converting revenues from yuan into foreign currencies to distribute dividends, increasing demand for foreign currencies and weakening the yuan.
Regulators are working to strike a balance between enhancing shareholder returns and supporting the currency, which is under growing pressure amid the likelihood of escalating tensions between the United States and China.
Markets currently expect Chinese companies to continue increasing dividend payouts despite the challenges these distributions pose to currency stability.
