Wednesday, March 09, 2016

China financial woes hit world markets

The FTSE 100 fell for the second session in a row on Wednesday 9th March following overnight figures which showed a 25% fall in Chinese exports last month. The fall in stocks was a further indication how world markets are affected by China's growth and decline.

Uncertainty over the state of China's economy is unsettling investors and has done for many months. "Global markets have been rattled by the sharp decline in China's exports which reinforced the lingering concerns over the slowing pace of growth in the world's second largest economy," said FXTM research analyst Lukman Otunuga [BBC].

It wasn't just London that was reeling markets in Asia and the rest of the world were also rocked [Bloomberg / FT].

The fall in Western markets came as new data revealed that Chinese exports saw their sharpest drop in almost seven years. Exports dropped sharply by 25.4% from a year earlier, while imports fell 13.8%. It has fuelled concerns over the health of the world's second largest economy and comes on the heels of Beijing registering the slowest economic growth in 25 years [BBC / BBC].

The newly released figures also coincide with the China's National People's Congress, currently underway in the capital Beijing, which has just revised the 2016 growth target down, predicting a "battle for growth" [BBC].

But while Western markets reacted negatively to the recent financial data coming out of China, Chinese stock markets have risen, shrugging off the fresh government data [BBC].

There are fears in some circles that China is heading for a fall. However not everyone is so pessimistic. Perhaps predictably China's chief economic planner said the world's second biggest economy will "absolutely not experience a hard landing" despite growth forecast cuts.

Predictions of an abrupt economic slowdown were "destined to come to nothing", said Xu Shaoshi, head of China's state planning agency.

China's National People's Congress on Saturday meanwhile lowered the economic growth target for 2016 to a range of 6.5%-7% [BBC].

It's not just economic news that is raising concerns. There is a fear that Beijing is making a sharp turn to increased authoritarianism [BBC].

There have been further clampdowns on free speech in recent days with Caixin a top financial magazine target over an ill-advised article on censorship [Guardian / BBC].

But President Xi Jinping's crackdown on free speech is also being criticized by advisers to China's Communist Party. Indeed, an unusual number of CPPCC members, who serve as advisers to the party from industry and academia, are openly advocating broader freedom in China [QZ].

Such calls have come after recent increased controls on cyberspace and a crackdown on human rights [CNBC / QZ].

China was recently ranked the world's worst abuser of internet freedom and its system of heavy censorship is now well known outside of the country []. However many people living in China are not so aware how censored information is.

And there appears to be no sign that Beijing will yield to calls for any relaxation on such censorship. In fact during last December's 'World Internet Conference', held in Wuzhen, China championed its vision of a new set of rules for cyberspace, by which any sovereign power can claim the right to keep its people in ignorance [BBC].

With an uncertain economy, tightening Internet restrictions, and further erosions of human rights perhaps it's no wonder there is a gradual but growing exodus from the country. But it is capital outflow that is the biggest concern for authorities. Thus Chinese officials are trying to slow the unprecedented money exodus from the country, clamping down on individuals seeking to flee the yuan and making life tougher for companies that need to trade the currency for dollars to do business [WSJ].

No-one thought Xi Jinping would offer an easy ride. But his authoritarian approach has perhaps exceeded even his worst critics.

tvnewswatch, London, UK

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