China stocks fall as Trump-Xi meeting yields little relief on key tensions

SHANGHAI, Sept 28 (Reuters) - China's blue-chip index slipped more than 2% to a 1-year low on Monday as optimism over the US-China summit faded, leaving investors focused on deepening economic imbalances and fresh geopolitical risks.

** Technology shares slumped after the US moved toward restricting the use of Chinese-made components used in AI data centres, dampening an already thin risk appetite ahead of a week-long holiday from October 1.

** The large-cap CSI300 Index .CSI300 lost 2.2% by the lunch break, on track for the worst showing in five weeks, and touching its lowest point since early September 2025.

** The Shanghai Composite Index .SSEC declined 1.7%.

** Stocks in Hong Kong, where the market will be open during much of China's Golden Week holiday, rose 0.6%.

** China said on Monday a two-month extension of a trade truce with the United States would provide space for both sides to evaluate the implementation of their arrangement to resolve economic and trade issues. The extension was one of the key takeaways from the meeting last week between China President Xi Jinping and US President Donald Trump.

** Despite the optics of the leadership summit, "the US and China remain divided across technology, security, trade and the broader architecture of international governance," OCBC Bank said in a note.

** Reflecting such divisions, a bipartisan group of US lawmakers introduced legislation on Friday to bar the federal government from equipping sensitive government systems with Chinese-made components used to transmit data in AI data centres.

** The news weighed on Chinese makers of optical transceivers such as Eoptolink Technology 300502.SZ and Innolight Technology 300308.SZ.

** Eoptolink tumbled 7% in Shenzhen while Innolight shares slumped roughly 9% in both Shenzhen and Hong Kong.

** China's CSI 300 Telecommunication Services Index .CSI000916 slumped more than 6% to a two-month low.

** Sentiment was further weighed down by data showing China's industrial profit growth slowed in August, highlighting deepening economic imbalances.

** Thin trading volumes indicated investors were reducing risk ahead of China's week-long National Day holiday.

** Investors also face a busy calendar of US inflation, jobs and GDP data during the break, while tensions in the Middle East remain an additional source of uncertainty.

** Xiangcai Securities said in a note that "risk aversion mood is permeating ahead of the long holiday, and trading will likely be thin" during the shortened trading week.

** Technology shares led the decline, with China's tech-focused STAR Market .CSI000680, startup board ChiNext .CHINEXTC and the small-cap CSI3000 Index .CSI932000 each fell roughly 4%.