With 2023’s first quarter nearly complete, the Chinese government recently offered up a look at what it expects for China in 2023. The news is not as bright as it has been, but overall, Beijing maintains a positive outlook. The recently-released government work report says there are still some bright spots, but an increasingly unstable world may drag China down accordingly. Chinese stocks, meanwhile, are likely to go down with it.
While China itself has been recovering from its losses due to the Zero Covid policy, there are signs it may have launched that recovery effort too late to enjoy it fully. Moody’s Investors Service senior credit officer and vice president, Martin Petch, noted that the “…pickup in China’s growth continues to face headwinds.” Among these, Petch noted were “…the impact of slower global growth on China’s exports” as well as “…risks associated with the property sector and local government debt.”
Meanwhile, the government looks to offer “mild expansion in fiscal support.” Petch takes that to mean that the Chinese government is concerned about financial stability overall and issues of leverage. That’s not so surprising. It was just last summer when Chinese village banks faced full-on bank runs over housing issues. The IMF also revealed that the real estate crisis in China isn’t over, either, and that may prompt further local banking crises as well.
As if in sympathetic shock, three major China-tracking ETFs fell in Monday trading. The Kraneshares Csi China Internet ETF (KWEB), the iShares MSCI China ETF (MCHI), and the iShares China Large-Cap ETF (FXI) lost 2.21%, 1.37%, and 1.15%, respectively.
