The China stock markets have been doing very well, just as stock markets elsewhere are doing very badly. What’s going on with that? It’s a pretty clear representation of decoupling for a start. Beyond that, with China there is always the question of whether government announcements and the National Team are leading the way in order to provide an upward momentum regardless of economic fundamentals. And right now, the fundamentals of China’s economy, including exports, consumer spending and the property market, are not looking rosy, so something else is at play. We are now in the channel leading through to the Big 20, at which point the situation will be excellent. Post-lockdown euphoria is also a possible explanation. It’s amazing how fast memories fade, but on the other hand, the shadow of what happened in the past few months will be cast over many corporate and personal decisions in the months ahead.
Meanwhile, foreign firms operating in China are reporting a significant drop in long-term profitability, and the United States announced a massive $600 billion alternative to BRI investment from G7 countries. If that’s real it will provide an answer to whether or not countries do the China deals because there are no alternatives.
Have a good weekend.