At the start of February China’s and Hong Kong’s equities market value is down 35% ($7tn) vs its peak in 2021 according to the Economist. This is in comparison to the US, which is up 14% and the India up 60%. This evidence reacting to growing uncertainty over the future of the Chinese market.

The Story 5 months ago:

5 months ago Ti’s Datasets of the Month article used IMF GDP and Trade forecasted as evidence that the Chinese economy was heading into a new low growth period. Data at the time suggested trade would grow on average less than 5% per year to 2028 in contrast to 14.8% between 2000 and 2018.

How has the story developed?

Since Ti’s brief published in August 2023, the value of the S&P China 500 has fallen 16% following consistent monthly falls. Prior to 2023 China’s zero covid policy was the main reason for poor Chinese economic growth. However, the economy struggled re-engage in 2023 and it appears investors are no longer expecting return to flourishing Chinese growth.

What does this mean for Logistics in the Country?

On January 31st Reuters reports China’s manufacturing output declines for the 4th consecutive month while the purchasing managers index rose 0.2 points in January to 49.2 this remains in sub-50 contractionary territory.

Industry looks set to have little demand-side incentive to expand. A toxic mix of deflation and weak domestic consumer demand means there is little domestic demand-side incentive to expand production. Whilst rising tension between the US and China continue to deter western companies from setting up long-term production relationships with Chinese suppliers.

From a purely financial standpoint falling equity markets will make raising capital harder and likely deter investment into production expansion. Combine this with a global trade finance gap reaching record high levels. the financial support for trade led industrial expansion is extremely low.

Based on the above we can expect financial markets to suggests the investments levels for Chinese international trade will remain subdued and point towards low growth rates in the coming year.


Author: Nathaniel Donaldson

Source: Ti

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