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China Slowdown - Whom to Blame ?

From November 2022 to January 2023, every news headline and financial market participant was focused on China. This was due to the government reopening and everyone expected a revenge spend similar to other big economies. But as data got released the actual difference between reality and estimate was much bigger. This has resulted in the local stock market giving up 10% since the January peak.

Though the government and central bank have taken many steps to encourage spending the needle of data is barely moving. This has resulted in many companies offering discounts and announcing early season offers to clear the inventory. But given that Covid data is still dark and some of the news is still reporting a peak that is yet to come. The demand side looks hard to recover.

Given such a scenario, real estate companies have stopped servicing offshore debt. Many global rating agencies and brokerages have downgraded the GDP growth. But we’re the estimates over-optimistic to start with and are the way getting over pessimistic now? The problem with this would be that if the data improves in the second half then commodities will see the first spike and it might lead to a second round of inflation.


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