Chinese Trouble
It’s clear that the economies of the Western world are currently struggling right now. Europe is at a high risk of recession, while the US has recorded 2 straight quarters of economic contraction and could be tumbling towards a recession too. The East has been quiet though, with China trying to find the mix between government policy and the economy’s success. It hasn’t been all sunshine there, with some data telling us that they are going through a large slowdown too.
China’s manufacturing sector, the key to its dominance in the world economy, contracted in July as the index fell from 50.2 to 49, which was unexpected as economists believed it would rise to 50.3. Contraction occurs when the index falls below 50, and that is exactly what happened. High material prices paired with decreasing exports are lowering profit margins and stifling the key sector. A key factor has been China’s zero-COVID policies, which have hurt Beijing a lot as lockdowns have slowed manufacturing at times, and this has hurt the overall economy. Going back to the middle of July, China reported a very slight gain in GDP, and they warned that they would miss their growth target for the end of 2022.
The other big sector in China is housing, which hasn’t fared well either. According to data from China Real Estate, the top 100 property developers have seen sales decrease by almost 40 percent from last year, and sales have fallen by 28.6 percent since June. The Chinese housing market has been reeling ever since the Evergrande scandal, with Chinese citizens buying less property and going back on their mortgages due to properties being unfinished. China is being affected by macroeconomic woes around the world, with US interest rate hikes being one of them, but the government is firm on what they are currently doing, which will make things interesting.
I am not a financial advisor and my comments should never be taken as financial advice. Investments come with risk, so always do your research and analysis beforehand.
