China in crisis: the Asian giant’s shares have had a negative year, what are the reasons?

China in crisis: the Asian giant’s shares have had a negative year, what are the reasons?

The Chinese Government is fighting the problems it faces in several areas and investors do not have good prospects for the Asian country’s assets.

National Geographic.

The Chinese economy does not have a good start to the year. After having closed 2023 with an increase of 5.2% in GDP, above expectations, the Asian Giant has strong economic challenges ahead of it and they are mainly related to a strong real estate crisis, a high level of debt and a halt in the growth of its population.

Although 2023 left positive data, This year could be much worse. There are economists who already warn that this year growth will be 4.5% or less due to a process of stagnation in a context in which sales in the real estate sector fall by 6.5%, private investment fell by 0, 5% year-on-year (data up to November/23) and the country has a deflation process. In fact, the Consumer Price Index (CPI) fell 0.3% last month.

In this context, local businessmen point out that their organizations face “enormous pressure” and they consider that the days of unbridled growth have passed. The key for them, now, is to make profits from overseas markets by shipping and selling around the world.

Chinese stocks in trouble

This occurs while the yuan weakens and Chinese stocks in all sectors are beginning to suffer on the stock market. The benchmark index of the Hong Kong Stock Exchange, where many of the country’s large companies operate, is not having a good time.

In December, the agencyMoody’s upgrades outlook on China debt from ‘stable’ to ‘negative’. The entity then saw “increasing evidence” that Beijing would provide “financial support” to local governments in difficulty, which in its opinion would pose “risks to the fiscal, economic and institutional strength” of the country.

On the other hand, Bloomberg recently warned that The macro leverage ratio, total debt as a percentage of GDP, has been rising to a record of 286.1% the fourth quarter.

Thus, pessimism regarding Chinese assets extends to all sectors in a year in which the expected change in Federal Reserve (FED) rates seems to benefit emerging countries.

Source: Ambito

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