China has been taking hits recently and now China's stock market decline could spell disaster for the country. With the decline of the stock markets, foreign investors have been pulling out en masse and they are likely not to come back. China's firms collectively have also suffered a 7 trillion dollar loss since early 2021 which has and will continue to greatly affect offshore traders.
China, which was originally a staple for stable growth for investors, will now change course because of these issues and become a beacon for fast profits. This will continue to contribute to the volatile funds swing that permeates through modern Chinese markets. There has been a response to these issues as Beijing has responded to the financial stress by including state-backed purchases as well as restricted access to offshore markets and curbs on short-selling.
One of the leading concerns for China is its property market which accounts for most of the country's GDP. It has recently sustained a mass of default waves with real estate giants forced to liquidate. There was also a crackdown on the tech sector in 2020 which led to more investors pulling out. Net foreign inflows last year reached only $6.1 billion, the lowest level since 2017.
And even without all the underlying issues China continues to impose worry by its intentions for stock investors. They have made various announcements directed at financial markets that suggest less tolerance for business as usual.
https://markets.businessinsider.com/news/stocks/china-economy-crash-real-estate-property-stock-market-foreign-investors-2024-2
5 comments:
It is interesting to see how China will attempt to save themselves from this financial situation. Things are not looking good for their economy considering they have lost 7 trillion dollars in 3 years. If massive cities such as Beijing are already having financial struggles, I wonder how the rest of their major cities are doing. China will need to come up with a good strategic financial plan to bring back investors and avoid any risks to the Chinese economy.
The situation looks very bleak for China. The property market declining is not something they want to see as their GDP has already been steadily declining for a bit now. Along with all this, their government has been almost non existent when it comes to enacting policy to fix their issues, making the future very uncertain. I wonder when their government will begin to step up again like they had done historically for years.
It feels like Chinese investors are not only loosing confidence in the stock market, but also in the government's ability to revert their deflation problems, which leaves the country in a not so good situation and with very low prospects.
China has taken some steps in trying to stabilize their capital markets, with some bailouts to real-estate development firms, lowering reserve requirements, and tightening terms on short-term foreign capital, It will be interesting to see if they saved themselves the pain of large trillion-dollar bailouts and the mass fleeing of capital or not.
It's interesting to see the shift in perception of China from being a stable growth staple for investors to becoming a beacon for fast profits due to recent issues, contributing to increased volatility in modern Chinese markets.
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