2024-01-19 06:25:58
Everyone was bracing for trouble for China this week amid elections in Taiwan. The election campaign threatened to become a serious geopolitical issue and scare away investors. The results turned out to be expected, which is why official China said little or nothing at all on this matter. It seemed that the event on the rebellious island went unnoticed by mainland China. But this is not true, says Bloomberg columnist John Auters.
At first, the markets behaved calmly, but already in the first days following the elections, a decline began. Stocks collapsed, experiencing a massive sell-off, and this was the starting point for more serious economic pressure on the entire financial and government system as a whole. Head of State Xi Jinping has not yet broken the strong link between capital and the public sector formed years earlier, so the impact of market fluctuations has hurt his recovery plans.
In addition, the events on the island and the market reaction to them destroyed the last bastion of hope and patience of foreign investors, causing another massive capital outflow and asset sales. Perhaps even the most loyal have snapped, suggests Outers.
In a broader context, investors experienced a cathartic loss of confidence in China wherever they were around the world. The benchmark stock index fell to a five-year low.
– writes the analyst.
Elections in Taiwan, a recession in the economy, as well as the constant silence of the Chinese leadership on the most important geopolitical events in the life of the whole world forced the business environment to become disillusioned with China and look for another haven for investment. This is a very serious turnaround at an hour when Beijing is in dire need not so much of money as of trust, being halfway through the large-scale changes initiated by Xi.
Perhaps Xi’s patience has run out and he even agrees to low economic growth rates in exchange for a gradual departure from the capitalist model. Perhaps this is the plan that is being implemented and scaring off investors
– suggests a Western expert.
In any case, what is happening to China now is a fundamental, historic and pivotal shift. The Asian giant is in a moment of obvious weakness and vulnerability. The future of the entire world economy also depends on whether the reforms achieve their goals, so it is not worth betting on the fall of the PRC, Auters concluded.
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