A trade dispute with the US and a crackdown on shadow banking made China the world’s worst-performing major stock market in 2018, shedding some $2.3tn in value. Investors say that while China’s intensifying trade war with the US grabbed much of the attention, a government campaign against leverage in the financial system played a big role in slowing market demand and forcing some funds into liquidation.

China’s benchmark CSI 300 index will finish the year close to 3,000, down more than 25 percent from where it started 2018, according to Bloomberg data. The staggering drop outpaced other poor performers: Japan’s Nikkei 225 dropped 14 percent, the US S&P 500 was down 8 percent and the UK’s FTSE 100 fell 13 percent. Worries surrounding the impact of the US trade war with China still loom large over markets ahead of the New Year.

However, comments from both the US and Chinese presidents over the weekend praising “positive progress” in talks could boost markets, which reopen today after a choppy Christmas week. President Donald Trump, who agreed to postpone his planned January increase of China tariffs at a G20 meeting early this month, said on Saturday that talks with Chinese counterpart Xi Jinping were “moving along very well”.

Arthur Kwong, head of Asia-Pacific equities at BNP Paribas Asset Management, said: “The Chinese stock market has experienced volatility over the year and seems to be pricing in an economic hard landing since June 2018 when the trade war concerns intensified.”