A Dive Into China’s Troubled Markets: Saturday Asia Briefing

Something for the weekend.

(Bloomberg) — We began the first half of the year with the hope that a much-delayed rebound in China from Covid would invigorate the global economy. We begin the second half with the same hope. But three weeks of stock-market losses, growing debt-market angst, record youth employment and the yuan near an eight-month low are sapping sentiment. This weekend, we take a health-check of the world’s No. 2 economy.

Movers and shakers

“We seek healthy economic competition that is not winner-take-all,” said Janet Yellen, during a meeting with Chinese Premier Li Qiang in Beijing. Soured relations with the Washington have been a major speed bump for China’s recovery, with US export curbs on chip equipment likely to be expanded to other high-tech sectors, and China imposing controls on minerals used in advanced technologies. At a roundtable on sustainable finance, Yellen said the two sides should join forces to tackle climate change. 

Complete control

The Chinese government’s ability to influence and control markets, especially through stimulus, are also seen as key to any sustained revival. Premier Li Qiang this week pledged to “spare no time” in implementing a package of “targeted” measures to stabilize growth and employment, but offered none of the specifics that investors have been clamoring for. The Communist Party’s Politburo holds a key economic meeting later this month that could give more details.

Should I stay or should I go?

Where global investors were once clamoring to pour money into Chinese equities, a once-unthinkable strategy of stripping those stocks out of emerging market portfolios is now gaining traction. Goldman Sachs and BlackRock are among more than a dozen firms that have launched emerging market ex-China funds since the start of 2022. 

Outside broadcast

Overhanging Chinese markets and trade are the ongoing geopolitical tensions in the region, not just with the US and Taiwan, but with many of China’s neighbors. In the South China Sea, the jostling is so ingrained that even the upcoming Barbie movie has been dragged into it.

Working and waiting

With so many clouds on the horizon, young Chinese consumers have become wary of spending their hard-earned cash. Instead, many are for the first time saving their money until stock and property markets recover. The search for yield is so intense that some are traveling hundreds of miles to find banks offering better rates, giving rise to “special forces-style” investing.

Clampdown

China imposed a fine of almost $1 billion on Jack Ma-backed Ant, signaling an end to a long-running clampdown on the Chinese internet industry that wiped hundreds of billions of dollars off the value of the sector — one more sign that Beijing will unfetter its giant private sector to help resuscitate the flagging economy. Ant today announced it will buy back billions of dollars of shares to give to employees as an incentive.

Cool under heat

Finally, far from the cauldron of the markets, scientists are dealing with a different kind of meltdown — the slow reduction of glaciers in the mountains of Sichuan. One way to slow the effects of global warming is to wrap them in biodegradable blankets.

Have a reflective weekend.

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