China's stock market faces challenges due to regulatory crackdowns, economic struggles, and geopolitical tensions

From Reuters: 2024-04-05 04:30:00

In 2024, CSRC, led by Wu Qing, held seminars with market participants to propose stricter scrutiny on listings and trading behavior post Lunar New Year. Major quant fund Lingjun Investment faced penalties for rule breaches causing stock exchanges impact. China’s stock market struggles post-zero-COVID policies affecting consumer spending and economic recovery, leading companies to seek growth abroad.

China’s real estate sector has faced a prolonged downturn with declining new home prices and defaults by top property developers. Sino-U.S. tensions have escalated, impacting trade and finance. Regulatory crackdowns in the tech sector have led to foreign direct investment decline and companies moving operations to other countries.

President Xi Jinping aims for high-quality development with reforms in the state sector, technological self-sufficiency, boosting domestic investment in key sectors, fighting monopolies, and corruption. Private firms suffer from regulatory crackdowns and economic challenges. Provinces face debt crises and the sustained property downturn impacts broader economic recovery.

Beijing implements measures to support the economy, including 1 trillion yuan of sovereign bond issuance, widened budget deficit, deep cuts to bank reserves, and benchmark mortgage rates. Plans for affordable housing, urban village renovation, infrastructure projects, and easing property purchase limits are in place. Refinancing bonds aim to ease local government debt burdens.

Sources: LSEG Datastream; NBS, China; BIS; LSEG Lipper; HKEx; IMF; Reuters; Vidya Ranganathan, Anand Katakam, Lincoln Feast.



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