China stocks plunged the most in two months on Wednesday as stimulus disappointed investors, sparking more policy easing arguments from analysts, while Sino-U.S. tensions returned to the fore after President Joe Biden called Chinese President Xi Jinping a "dictator".

 

** China's blue-chip CSI300 Index closed down 1.5%, and the Shanghai Composite Index slumped 1.3%. Both indexes logged the biggest daily fall since April 21.

** Hong Kong benchmark Hang Seng Index plunged 2% and the Hang Seng China Enterprises Index dropped 2.2%.

** Chinese stock markets will be closed for Thursday and Friday for the Dragon Boat Festival, while Hong Kong market will be shut for Thursday.

** Other Asian stocks also struggled as a lack of new stimulus steps from Beijing frustrated investors, who wondered just how hawkish the U.S. Federal Reserve would be later in the day.

** China cut its key lending benchmarks on Tuesday to shore up a slowing economic recovery, but the cut to the five-year rate was smaller than many expected.

** "Policy easing is imminent and necessary to shift investment back to being a countercyclical rather than pro-cyclical force," said Morgan Stanley in a note.

** "If policymakers do not make concerted efforts to revive private sector dynamism, we think longer-term growth rates could slip even more than we are currently projecting."

** Biden on Tuesday called Xi Jinping a dictator and said Xi was very embarrassed when a Chinese balloon was blown off course over the United States earlier this year.

** Meanwhile, China announced an extension of a purchase tax break on new energy vehicles (NEVs), but it failed to lift up new energy shares.

** Shares in most sectors fell, with artificial intelligence down 5%, and Shanghai's STAR 50 Index fell 3.3%.

** Tech giants listed in Hong Kong tumbled 2.8%.

(Reporting by Shanghai Newsroom; Editing by Sonia Cheema)