September 2, 2023
1 min read

Investors Worry Over China’s Sluggish Growth

Hong Kong’s Hang Seng (HSI) Index slid into a bear market on Friday, having fallen more than 20 per cent from its recent peak in January.

China’s economic slowdown has alarmed international leaders and investors, as per CNN.

For the first time in decades, the world’s second economy is itself in trouble.

Hong Kong’s Hang Seng (HSI) Index slid into a bear market on Friday, having fallen more than 20 per cent from its recent peak in January.

The Chinese yuan, last week, fell to its lowest level in 16 years, prompting the central bank to make its biggest defence of the currency on record by setting a much higher rate to the dollar than the estimated market value.

The issue is that, after a rapid spurt of activity earlier this year following the lifting of COVID lockdowns, growth is stalling. Consumer prices are falling, a real estate crisis is deepening and exports are in a slump. Unemployment among youth has gotten so bad the government has stopped publishing the data, as per CNN.

A major homebuilder and a prominent investment company in China have missed payments to their investors in recent weeks, rekindling fears that the ongoing deterioration of the housing market could lead to heightened risks to financial stability.

A lack of resolute measures to stimulate domestic demand and fears of contagion have triggered a new round of growth downgrades, with several major investment banks cutting their forecasts of China’s economic growth to below five per cent, according to CNN.

UBS analysts wrote in a Monday research note: “We downgrade China’s real GDP growth forecast … as the property downturn has deepened, external demand has weakened further, and policy support has been less than expected.”

Researchers at Nomura, Morgan Stanley and Barclays had previously trimmed their forecasts.

That means China might significantly miss its official growth target of “around 5.5 per cent,” which would be an embarrassment for the Chinese leadership under President Xi Jinping, according to CNN.

ALSO READ: China’s Banking Crisis Intensifies Amid Escalating Property Sector Issues

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