China

<strong>Perils to the Private sector in China: Delayed payments, Deflation, and the State</strong>
China

Perils to the Private sector in China: Delayed payments, Deflation, and the State

While the rest of the world experienced a resurgence of the private sector in the post-pandemic era, majorly due to the base effect, leading to expansion in hiring and capital expenditure by the private sector, China has been sailing in the opposite stream ever since. The private sector in China is not all right. China has been squeezing out its private enterprise, which impacts a large section of the population as 80 percent of the workers are employed in the private sector. The private sector has lost confidence, and as a result, we see the private sector is reluctant to expand, and as a result, private capital expenditure is dropping. Interestingly, the gap in profits earned between the private sector and SOEs (state-owned enterprises) has fallen since 2015. There are multiple re...
China, World

Is the Chinese Economy in Crisis?

China’s economy is showing multiple signs of weakness. Actual growth seems below the official figures; there is substantial deflation; the housing market has yet to stabilize; and the domestic stock markets have fallen significantly. Domestic confidence is flagging, and foreign investment in 2023 was at a three-decade low. Are we witnessing the early days of an emerging full-blown economic crisis, is this just a deeper than unusual cyclical downturn, or are the worries vastly overblown? How should international investors and other governments respond? At this online event, CSIS Trustee Chair Scott Kennedy will seek answers to these questions to a stellar group of economic experts: Steven Barnett, Senior Resident Representative in China for the International Monetary Fund; Logan Wright,...
Investors betting on more rate cuts cause China’s government bonds to rise.
China, World

Investors betting on more rate cuts cause China’s government bonds to rise.

SHANGHAI: China's government bonds rose on Friday, as market participants bet on further monetary easing following the biggest ever reduction in the mortgage rate while risk appetite fell slightly as local shares snapped their winning streak. The country slashed the benchmark mortgage rate by 25 basis points this week, the largest cut since the reference rate was introduced in 2019 and far more than analysts had expected. The deep cut prompted market expectations that more policy easing would come to shore up a recovery in the world's second-largest economy. Thirty-year treasury futures for March delivery rose to their highest level since the contract was launched in 2023, while benchmark 30-year yields fell to 2.5720%, the lowest on record. Meanwhile, the yield on the benchmark ...
Following a “messy” quarter caused by the China issue, HSBC shares fell.
China, World

Following a “messy” quarter caused by the China issue, HSBC shares fell.

HSBC was stung by China’s economic slowdown after a “messy” quarter including a $3bn (£2.4bn) writedown sent its share price tumbling by 8pc in one of the worst falls in the bank’s history. China’s crippling economic woes prompted the Asia-focused lender to slash the value of its investment in Bank of Communications (BoCom), one of China’s “Big Five”. The devaluation of the Argentine peso in December because hyperinflation in the country also shaved $500m from profits. This contributed to an 80pc fall in fourth-quarter profits to $1bn, marring an annual record as gains for the entire year rose to $30.3bn. Citigroup analyst Andrew Coombs said the final quarter was “messy” due to the one-off impairments, with the share price fall wiping £10bn from the bank’s value. HSBC chief...
China is under increasing pressure to make significant policy changes to improve its economy.
China, World

China is under increasing pressure to make significant policy changes to improve its economy.

The start of the year saw Chinese stocks tumbling to five-year lows on growth concerns and deflation deepening to levels unseen since the global financial crisis, prompting comparisons with the 2015 turmoil that forced policymakers into action. As the annual meeting of China's parliament approaches next month, its leaders are facing the greatest pressure in almost a decade to take bold policy decisions that safeguard the economy's long-term growth potential. The start of the year saw Chinese stocks tumbling to five-year lows on growth concerns and deflation deepening to levels unseen since the global financial crisis, prompting comparisons with the 2015 turmoil that forced policymakers into action. "The last time the Chinese leadership faced this kind of pressure was in 2015," sa...
Leader of China, Xi Jinping, is struggling with a $7 trillion recession as the nation’s debt levels rise, real estate collapses, and markets retreat more than 21% from their 2021 highs.
China, World

Leader of China, Xi Jinping, is struggling with a $7 trillion recession as the nation’s debt levels rise, real estate collapses, and markets retreat more than 21% from their 2021 highs.

As China grapples with the fallout from a $7 trillion stock decline, officials are gearing up to brief President Xi Jinping on measures to stabilize the market. This move signifies Beijing’s urgency to restore investor confidence and halt the market’s slide, which has erased a significant value from Hong Kong and China equities since their 2021 peaks. The Shanghai Composite Index, for example, is down over 21% from its high in December 2021. The downturn has been attributed to a variety of factors, including regulatory crackdowns, geopolitical tensions, real estate defaults and internal economic pressures, prompting a call for decisive action to prevent further damage to consumer confidence, especially as the country approached the Lunar New Year holiday. China’s real estate sector ...
Year of the Dragon: China is at a turning point in its efforts to boost the economy
China, World

Year of the Dragon: China is at a turning point in its efforts to boost the economy

Analysts say Beijing needs to roll out measures to stimulate greater domestic consumption amid slowing growth. China last year narrowly beat its economic growth target of 5 percent, one of its lowest benchmarks in decades. Looking ahead, analysts expect the economy to face stiff headwinds in the Year of the Dragon. Against the backdrop of a crisis-stricken property market, subdued export earnings and crackdowns on private industry, international investors are pulling out of Chinese stocks at record rates. With business sentiment faltering, economists broadly agree that Beijing needs to roll out measures to stimulate more domestic consumption. While some analysts are calling for radical measures to jolt China’s economy, expectations are subdued owing to Beijing’s aversion to br...
China, World

China’s Economy in the Year of the Dragon: It’s a bleak place

At the end of January, a Hong Kong judge ordered the liquidation of the heavily-indebted Chinese real estate giant Evergrande. It was just the latest piece of bad news for China’s economy, after a year of disappointing growth, high youth unemployment, and various surveys and media reports that show a lack of confidence amongst China’s entrepreneurs and consumers. Some observers have been predicting an economic collapse in China for decades. Others have long predicted that China would be stuck in a middle-income trap or some other type of economic stagnation. Might some of these predictions come true this time? What does the Year of the Dragon have in store for consumers, companies, and markets? What should we look out for this year to understand both China’s real economy and its financ...
A think tank claims that while the collapse of Evergrande is not China’s “Lehman moment,” it does make economic recovery more difficult.
China, World

A think tank claims that while the collapse of Evergrande is not China’s “Lehman moment,” it does make economic recovery more difficult.

China's crumbling property sector, its stock market crash, and its gummed-up economy have drawn some comparisons to the 2008 crash in the US. A few weeks ago, the Chinese property giant Evergrande received a liquidation order from a Hong Kong court, forcing the sale of its assets to repay the company's $300 billion worth of debt. This has spurred on the question: is the Evergrande collapse China's "Lehman moment?" The answer, according to one think tank, is no. But it does pose an obstacle to an economic rebound. "Evergrande's bankruptcy is not China's Lehman moment; its downfall is unlikely to immediately trigger a contagion across the entirety of China's financial system," Zongyuan Zoe Liu, a Council of Foreign Relations expert, wrote on Tuesday. Back in 2008, Lehman Brot...
A <strong>$278 billion stimulus failed to revive China’s manufacturing growth</strong>
China

A $278 billion stimulus failed to revive China’s manufacturing growth

According to 'Trading Economics,' the deposit Interest Rate in China averaged 1.03% from 1990 to 2023. The highest was 3.15% in July 1993 and is now ruling at 0.35%. This is like the developed nations. However, China is not a developed nation. It was definitely not so in 1990. Yet China's central bank kept the deposit rates low. Manufacturing and real estate were top gainers. The common people of China paid the price. Their hard-earned money didn't earn interest from the bank. They do not trust their capital market. They had no safe choice to grow money. The Chinese Communist Party (CCP) forced them to buy apartments as a means of investment. Property builders enjoyed every bit of it. They had both access to dirt-cheap project finance from banks and assured flow of customers. The bu...