China’s economic struggles create spillover worries
- August 20, 2023
- Posted by: Quatro Strategies
- Categories: Business & Politics, China
China’s recent economic troubles could have significant repercussions beyond its borders, impacting global markets and economies in various ways.
China plays a major role in global trade, accounting for about 30% of global growth. Any domestic economic challenges in China can lead to far-reaching implications for markets around the world. The softening of Chinese demand has already resulted in declining exports and imports. While this could reduce inflationary pressures, it might negatively affect producers and exporters in other markets, leading to economic slowdown and job losses. Additionally, a prolonged slump in Chinese exports could disrupt global supply chains.
A slowdown in China’s economy could lead to the export of deflation to the world. This could hurt corporate profits in the US and other countries, impacting their economies. Companies that have significant ties to China are already experiencing lower sales and reduced outlooks. Widespread declines in China’s consumer prices might lead to higher prices for consumers in other countries, affecting personal-care products and cars, among others.
The weak consumer spending and domestic demand in China are linked to risks in the domestic property market. Housing assets constitute a significant portion of Chinese households’ wealth, and uncertainty in the property market is making people hold onto their cash instead of spending it. The turmoil in the property market is impacting China’s overall growth by affecting industrial output, discouraging spending, eroding government revenue, and increasing financial sector risks. Chinese developers’ liquidity constraints could lead to defaults on US-denominated bonds.
The housing crisis and broader economic challenges in China could create a lasting drag on future global growth. As China struggles to address its economic issues, its traditional measures of growth might not be reliable anymore. This could have a negative impact on global markets and economies that depend on China’s growth.
Overall, the challenges in China’s economy have the potential to disrupt global trade, trigger deflation, and slow down growth, affecting various sectors and markets worldwide.
Interested in learning more?
Sign up for Top Insights Today
Top Insights Today delivers the latest insights straight to your inbox.
You will get daily industry insights on
Oil & Gas, Rare Earths & Commodities, Mining & Metals, EVs & Battery Technology, ESG & Renewable Energy, AI & Semiconductors, Aerospace & Defense, Sanctions & Regulation, Business & Politics.
Read more insights
Trump administration targets Chinese drones, solar inputs with fresh investigations
The U.S. Commerce Department announced on Monday that it has launched national security investigations into imports of drones and related components, as well as polysilicon, which is a critical input for solar panels and semiconductors. These “Section 232” investigations — opened quietly on July 1 and only now disclosed — could pave the way for the Trump administration to impose even higher tariffs on these products.
This is part of a broader strategy under President Donald Trump, who has aggressively used national security grounds to justify trade restrictions across multiple sectors. Similar investigations have already been initiated under his administration into imports of commercial aircraft, jet engines and parts, heavy trucks and components, semiconductors, and pharmaceuticals.
Record influx of foreign funds signals confidence in South Korean stock market reform
Global investors are showing unprecedented interest in South Korean stocks, signaling optimism that the country’s historically weak corporate governance is undergoing a transformation. Since the beginning of the year, foreign funds have poured 10.2 trillion won ($7.7 billion) into Kospi shares…
Japan, China, South Korea, and ASEAN create new crisis lending mechanism
Japan, China, South Korea and the 10 ASEAN countries have agreed to launch a new emergency lending facility under their joint financial framework, aiming to bolster regional resilience against economic shocks stemming from pandemics or natural disasters.
The agreement was reached during a meeting of finance leaders from the so-called ASEAN Plus Three group in Milan, Italy. The new mechanism will operate within the existing Chiang Mai Initiative Multilateralization (CMIM) framework, a currency swap arrangement established in the aftermath of the 1997–1998 Asian financial crisis to enhance regional financial stability.