China’s stock market has suffered a staggering $6.5 trillion loss since its peak in 2021. This massive decline is roughly equivalent to the entire market value of Japan. Many investors blame the policies of President Xi Jinping’s Communist Party for the economic woes.
These include strict COVID-19 lockdowns, crackdowns on tech companies, and slow efforts to stabilize the crashing property market. Calls are growing for Beijing to take more aggressive steps to revive growth. However, investors remain skeptical about the long-term attractiveness of Chinese stocks due to deep-rooted issues such as state control over the private sector.
“The fear is that the authorities are losing control of the economy and they won’t admit it,” said Gary Dugan, chief executive officer of the Global CIO Office. “The market looks set to go to significantly lower levels in the absence of real, substantial new policies.”
Authorities have been hesitant to launch large-scale fiscal stimulus since they acted to deflate a property bubble, which has contributed to the current crisis.
China’s market turmoil deepens
Support measures such as interest-rate cuts and state funds’ purchases of exchange-traded funds have done little to revive sentiment. The main driver of the Chinese economy this year — bolstered by exports and government support — appears to be losing momentum. Industrial output expanded at a slower rate than economists had expected, extending a weakening streak to four months.
Veteran emerging-market investor Mark Mobius believes that stimulus can only go so far in China’s current business climate. “The real problem is that the entrepreneurial impetus is missing, with lots of businessmen unwilling to invest,” Mobius said. “It will be necessary for the government to loosen up on private enterprise restrictions and regulations so the private sector can be stimulated and help grow the economy.”
Many economists argue that President Xi must focus on treating the underlying causes of China’s economic funk, not just the symptoms.
They say it’s time for Beijing to go big on leveling playing fields, recalibrating growth engines, and building a trusted market infrastructure. If not, China’s doddering economy may lead to even bigger stock losses that revive debates about whether the place really is “un-investable.” The hope is that this latest bout of market turmoil reminds Xi’s team that time isn’t on Beijing’s side.
- Bloomberg.”Chinese Stocks Slip in Hong Kong After Economic Data Disappoint”.
- Yahoo.”Chinese Stocks at Risk of More Losses as Economic Gloom Worsens”.
- Forbes.”China’s $6.5 Trillion Loss Should Have Xi Jinping Looking In The Mirror”.