By lunchtime, the benchmark Shanghai Composite index sat 8 percent lower near an almost one-year trough and poised to post its worst day in more than four years.
Euro zone GDP data returns better than expected, lifting the euro, as the dollar weakens after interest rate cuts by the Federal reserve.
US bond yields up slightly after sharp fall in August, while European shares seen dipping slightly. Meanwhile, pound sterling drops to just below $1.2, its lowest level since January 2017.
As share markets flatlined on as uncertainty over the outlook for US interest rate cuts, the Chinese yuan's slump sapped their appetite for risk, with dealers saying state-owned banks were seen selling dollars to support the yuan.
The deal between Presidents Donald Trump and Xi Jinping on the suspension of additional tariffs has heated up Chinese shares and commodities in the opening day of stocks.
While palpable, relief over a US-Mexico trade deal was dimmed by concerns that the China-US trade war will drag on for some time.
Negotiations to raise a Chinese quota on imported films and boost the share that overseas producers get of box office takings are now being discussed within the broader framework of a US-China trade stand-off, sources say.
Economists say the move by the central State Bank of Pakistan would simplify a massive Chinese investment project.
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