China’s capital market continues to turn red as new macroeconomic data shared by China creates new doubts among analysts. Is the situation really worrying?
The issue concerning China continues to arouse concerns among many experts and analysts, who highlight how such concerns have a negative impact on the flow of direct investments in the country. This situation has led to Chinese asset prices stabilizing. In recent times, various data have highlighted a further deterioration in the Chinese economic situation, fueling distrust of investors.
However, some observers do not consider the situation so critical, emphasizing that Chinese productivity growth remains positive, still contributing significantly to a large part of global economic growth.
Certainly, there are several factors at play, such as political and economic uncertainties, international trade tensions, and concerns about the sustainability of the Chinese growth model.
China: macroeconomic data to consider
In the second quarter of 2023 (Q2), China’s GDP grew by 6.3% year-on-year. Although the National Bureau of Statistics (NBS) in Beijing described this growth as "positive momentum" indicative of stability in the compositional productivity variables, analysts had forecast higher growth, approximately 7,1%. Morgan Stanley also recently downgraded its 2023 GDP growth forecast from +5.7% to 5%.
China appears to be struggling to meet its 2023 growth targets, with particular concern about retail sales (the country’s consumption), the collapse of exports, and difficulties in the Chinese real estate market. Also worrying is the unemployment rate among young people aged between 16 and 24, which reached a new record of 21.3% in June.
Although the PBOC (People’s Bank of China) has decided to keep interest rates unchanged, skepticism remains in the West, especially with regard to the performance of the Chinese capital market, which continues to register new losses: the Shanghai Stock Exchange Composite Index is down by 6% compared to the highs reached in 2023 and the real estate market, with prices in constant decline, blocking a large part of new projects.
What worries Western markets?
A major question remains: why is there so much alarm in the West about data from China, despite its GDP growth rate being significantly higher than that of Western economies when measured in absolute terms?
The main source of concern is the lack of a stimulus plan from the government and the PBOC (People’s Bank of China). In short, this backlash could take on broader dimensions. This could have potential implications for the rest of the economies linked to the Chinese one.
Original article published on Money.it Italy 2023-07-20 07:37:00. Original title: Azioni Cina verso i minimi: lo scenario è davvero così tanto critico?
