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London
CNN
—
Chinese stocks had a very bad week.
This comes despite the Chinese government’s recent attempts to boost confidence in the economy and stem a prolonged stock market slump that has wiped out $6 trillion worth of value in three years. Even after all these years, investors are still rushing to exit.
The Shanghai Composite Index fell 6.2%, its biggest weekly decline since October 2018, and the Shenzhen Composite Index fell 8.1%, its biggest decline in three years. Since the beginning of the year, the indexes have fallen more than 8% and 15%, respectively.
China’s blue-chip CSI 300 index, made up of 300 major stocks listed in Shanghai and Shenzhen, also fell 4.6%, its worst week since October 2022. The index is down 7% since the beginning of the year.
A record slump in the dominant real estate market, high youth unemployment, deflation and a rapid birth rate are just some of the problems plaguing the world’s second-largest economy.
The International Monetary Fund forecast that China’s annual growth rate in gross domestic product (GDP) will slow to 4.6% this year from 5.2% in 2023, one of the slowest in decades. is expected to decline further to approximately 3.5% in 2028.
AFP/Getty Images
An investor looks at a screen showing stock market movements at a securities company in Fuyang, eastern China’s Anhui province, on January 17, 2024.
This week began with a Hong Kong court ordering Evergrande, the world’s most indebted property developer and the catalyst for the real estate crisis, to go into liquidation.
But far from being the end, the order was the first by a Hong Kong court to liquidate such a large Chinese company, raising many questions about the future of the vast business and other bankrupt developers.
Last week, the People’s Bank of China and the Chinese government announced they would expand access to commercial bank financing for real estate developers.
“These policies indicate that developers in better health can expect increased financing this year, while those struggling to service their debts will see a bigger increase in financing,” said Diana Choyleva, chief economist at Enodo Economics. “There is a high possibility that we will be on the path to.”
The move comes in a series of confidence-boosting moves, including further opening up China’s $64 trillion financial industry to foreign investors and taking stock price movements into account when evaluating the performance of state-owned enterprises. It was the latest in a number of initiatives.
Last week’s new measures brought some temporary relief to investors, but it’s clear that they remain concerned about the trajectory of China’s economy.
“So far, there appears to be no policy guidance or commitment on how to ‘promote growth’,” Bank of America analysts said in a note Thursday.
Analysts said Chinese investors they spoke to were concerned about the long-term outlook for the economy and had “low expectations” for government stimulus.
China’s problems stand in stark contrast to the fate of neighboring India. The country’s benchmark Sensex index, which tracks 30 large companies, and the broader Nifty 50 index have risen to a series of record highs in recent months.
The surge in Indian stocks reflects the potential of a rapidly growing economy. The International Monetary Fund predicts that India’s gross domestic product will grow 6.5% in 2024 and 2025, far outpacing other major global economies.
— Laura He contributed to the report.
This article has been updated with more information and background.
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