China's economic slowdown, marked by falling consumer prices, a deepening real estate crisis, and a slump in exports, has alarmed international leaders and investors, causing Hong Kong's Hang Seng Index to fall into a bear market and prompting major investment banks to downgrade their growth forecasts for China below 5%.
Chinese shares dropped as banks in the country cut interest rates less than expected, with the benchmark one-year loan prime rate being lowered by 0.1 percentage point to 3.45%.
The volume of investment guarantees provided by the German government to companies investing in China has significantly decreased this year, reflecting Germany's efforts to reduce reliance on the country and address security concerns related to advanced Chinese manufacturing.
Profits at China's industrial firms fell 6.7% in July, marking the seventh consecutive month of decline, as weak demand continues to hinder the country's post-pandemic recovery.
Sinopec's first-half profit drops by 20% due to China's slowing economy impacting fuel demand.
China's economic slowdown is causing alarm worldwide, with countries experiencing a slump in trade, falling commodity prices, and a decrease in Chinese demand for goods and services, while global investors are pulling billions of dollars from China's stock markets and cutting their targets for Chinese equities.
Chinese investments in Brazil dropped by 78% in 2022, reaching the lowest level in 13 years, primarily due to a decrease in funds allocated to resource projects, according to the Brazil-China Business Council.
China's economy will struggle with low growth under 5% through 2024, leading to a "structural hard landing" due to tight monetary policy, disappointing economic reopening, and challenges in real estate and stock markets, according to TS Lombard strategists.
Most Asian stocks fell on Tuesday due to concerns over slowing growth in China, a property sector meltdown, and hot inflation readings, which raised concerns over higher interest rates. Chinese stocks were the worst performers, with investors growing impatient with Beijing's slow approach to stimulus measures.
Asia stocks fall as weak economic data in China and Europe raise concerns over global growth, while the dollar strengthens as investors assess the outlook for U.S. interest rates.
China's share of US goods imports has dropped to its lowest level since 2006, as American companies reorganize supply chains to reduce dependence on China and shift to countries like Mexico and Vietnam.
Foreign investment in Israel has dropped by 60% in the first quarter of 2023 compared to the average quarterly figures in 2020 and 2022, with a decline in both the number of transactions and investors, attributed to tech layoffs, a decline in valuations of US tech companies, and investor concerns over the proposed judicial overhaul.
China's property shares are declining and tech shares are underperforming, leading to a slide in the Asian market, while the European market waits for monetary policy decisions from the ECB and the Bank of England.
China's economy is expected to grow less than previously anticipated due to struggles in the property market, leading economists to predict further downgrades and posing risks to both the domestic and global economy.
U.S. and European firms are redirecting their investment away from China to other developing markets, primarily India, due to concerns over China's business environment, economic recovery, and politics, according to a report from Rhodium Group, although China's share of global growth continues to increase.
China's economy is facing potential decline due to high debt levels, government interference, and an aging population, with warnings of a full-blown financial crisis echoing the 2008 US recession. Failure to liberalize the economy could have long-term consequences, as foreign investments are restricted and the lack of capital inflow and outflow could harm businesses.
Chinese stocks experienced their largest monthly outflow in August, as waning interest from global investors was driven by negative sentiment over the country's economic outlook and concerns over regulatory uncertainty and strained international relations. Foreign direct investment (FDI) inflows to China also contracted, with China's share of FDI inflows among emerging markets predicted to decline to less than 30% by 2027.
China's currency, the yuan, has depreciated over 8% against the dollar as the Chinese economy grows less than expected, making it harder to reach its growth target of 5% for 2023, and worries about the economy have intensified due to issues in the real estate sector and financial health of local governments, causing concerns about the future of the yuan which may experience a slow but steady depreciation in the face of a weak dollar and a desire to maintain a trade surplus.
The massive retreat of funds from Chinese stocks and bonds is reducing China's influence in global portfolios and accelerating its decoupling from the rest of the world, as foreign holdings of equities and debt have significantly decreased amid China's economic slump and tensions with the West.
Summary: U.S. stocks slumped amid mixed sentiment about the economy, with only the Dow Jones Industrial Average rising for the week, while Asia-Pacific markets mostly fell, and China's venture capital investment dropped by 31.4% compared to 2022 due to its sluggish economy and geopolitical tensions discouraging foreign investors.
Chinese sovereign lending to Africa dropped to its lowest level in nearly two decades, falling below $1 billion in 2021, as Beijing shifts away from big infrastructure projects on the continent due to debt crises and economic headwinds at home.
The outlook of U.S. companies on China's markets in the next five years has hit a record low due to factors such as political tensions, tariffs, slow Covid recovery, and issues in the real estate market; however, complete decoupling between the two economies is unlikely.
China experienced its largest capital outflow since 2015, with $49 billion leaving the country, as economic concerns prompt investors to withdraw; of this, $29 billion was withdrawn from securities investments, including bonds. The outflow was compounded by a record-high $12 billion in mainland-listed stocks being dumped by foreign investors and a $16.8 billion deficit in direct investment, the largest since 2016. The decline in the capital account was exacerbated by the tourism season, with outbound travel negatively impacting the services sector, while inbound travel remained suppressed, causing a continued deficit in the services trade. Efforts by Beijing, such as reducing the foreign currency reserves held by banks, have aimed to support the yuan but have been unable to prevent a significant decline in the offshore yuan. Weak exports and the allure of US yields have also contributed to the yuan's decline, further complicating China's capital flight situation, as doubts about the country's ability to achieve its 5% GDP target for the year grow.
U.S. companies are losing confidence in China and some are limiting their investments due to tensions between the two countries and China's economic slowdown.
Chinese stocks defy regional declines as tech stocks rise, while the 10-year Treasury yield slightly decreases from a 16-year high; US futures tick higher following a 1.6% slide in the S&P 500; bond yields rise in Australia and New Zealand after positive US labor market data; and India's sovereign debt is set to be included in JPMorgan's benchmark emerging-markets index.
