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SHANGHAI/HONG KONG, Sept 2 (Reuters) - China's stock markets rose on Monday and the yuan steadied despite Beijing and Washington pressing ahead with new tariffs over the weekend, adding to strains on Chinese manufacturers and exporters.
The United States on Sunday began imposing 15% tariffs Chinese goods, including footwear and smart watches, as China hit back with duties on U.S. crude, marking the latest escalation in their year-long trade war.
But Chinese stocks were buoyed by a surprise rise in its August factory activity, even though the gains in a private survey were modest and bucked an official reading on Saturday which pointed to a further contraction.
Shares in Shanghai .SSEC and blue-chips .CSI300 rose 0.8%.
Stronger infrastructure spending may be helping manufacturers to some degree, but given continued domestic and export weakness "we think authorities will have little choice but to roll out further policy easing measures in the coming months," Capital Economics said in a note.
The yuan also showed some signs of steadying after its worst monthly slide in 25 years in August as the trade dispute intensified.
The People's Bank of China (PBOC) set the midpoint rate CNY=PBOC at 7.0883 per dollar prior to the market open, the weakest since March 13, 2008, but only 4 pips weaker than the previous fix.
The guidance rate CNY=PBOC was stronger than markets had expected for the fifth session in a row, which traders see as an official attempt to slow the currency's decline.
Spot yuan CNY=CFXS was off by less than 0.1% in early onshore trade.
"The PBOC continued to use its counter-cyclical factor heavily in the midpoint setting," said a trader at a Chinese bank. "The spot yuan is likely to consolidate at current level."
In Hong Kong, the Hang Seng Index .HSI was down 0.4% after another weekend of violent protests and as demonstrators target the financial hub's airport again.
(Reporting by Winni Zhou and Noah Sin; Editing by Kim Coghill)
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