China’s ‘Forced Smile’: Stock Market Illusion vs. Economic Reality
Even though China’s stock market has been rising a lot lately, this doesn’t match the country’s still-weak economy. Ongoing problems in real estate and U.S. tariffs are putting pressure on China and could slow its long-term economic recovery.
Stock market hits record highs despite worrying fundamentals
A recent Bloomberg report shows that even though the overall economy has slowed down, China’s stock market has gained nearly a trillion dollars in just one month. Key indexes like the Shanghai Composite have climbed to their highest level in a decade, and the CSI 300 has risen more than 20% from this year’s low despite weak economic fundamentals such as soft consumer spending, falling prices, and near-zero inflation.
Excess liquidity fuels stock market surge
Analysts believe the stock market’s rebound has been driven by ‘excess cash’ with limited investment options, pushing funds mainly into equities. However, many are beginning to question the sustainability of this recovery. Nomura has warned of ‘over-speculation,’ while TS Lombard points out that the market is caught between a ‘bull run’ and ‘bear market realities.
Deflation and weak consumer spending
One of the most serious concerns is deflation, which has been steadily eroding the economy. China’s producer prices have fallen for 34 consecutive months, and the GDP deflator remains negative showing that domestic purchasing power is still weak and hurting many businesses’ pricing power.
Although Beijing has introduced targeted measures to stimulate the economy, there are still no signs of large-scale actions like in the past. This has kept expectations for an economic recovery under question especially as profits for companies in the CSI 300 index have started to fall, and both sales and private-sector investment came in lower than expected in July.
Risk of repeating the 2015 stock market bubble
Positive outlook: Factors supporting the market
Still, some experts hold a positive view, believing that today’s Chinese economy has a more stable deposit base, stronger technology companies, and more targeted market support policies than a decade ago, factors that could help sustain the market for a while.
“Overall, however, China’s current ‘bull market’ may not truly reflect a real economic recovery. It could instead be just an illusion amid an economy that has yet to fully rebound. Without proper policy adjustments or adequate support, investor confidence could soon be shaken.”
For anyone who wants to exchange foreign currencies in the Huai Khwang area, you can easily exchange your money at ACU Currency Exchange. Just get off at MRT Huai Khwang Station, Exit 4, then walk straight for 500 meters, and you will see the ACU Building (head office).
You can check the daily exchange rates during business hours at https://acu-exchange.com/
or pre-order your currency in advance through Line OA : https://lin.ee/ph4iznU
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- Popular Tag | china stock market, GDP
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