China – Economy bottoming out amidst increasing risks | Harris Fraser
Research Insights
25 May, 2020
China – Economy bottoming out amidst increasing risks

With the virus threat fading out in the country, Chinese markets continued to see gains in April, the CSI 300 Index and the Shanghai Composite Index were up by 6.14% (6.43% in USD) and 3.99% (4.27% in USD) respectively, while the Hang Seng Index also gained 4.41% (4.42% in USD).

With the virus threat fading out in the country, Chinese markets continued to see gains in April, the CSI 300 Index and the Shanghai Composite Index were up by 6.14% (6.43% in USD) and 3.99% (4.27% in USD) respectively, while the Hang Seng Index also gained 4.41% (4.42% in USD).

In terms of economic fundamentals, China seems to have started the recovery from the covid-19 impact, various PMI figures have mostly recovered to pre-crisis levels, other indicators like industrial production, retail sales and export figures have bottomed out, solidifying China’s position as the first major economy to exit the epidemic cycle. The actual epidemic in China has seemed to come to an end, the meeting dates of the previously delayed National People’s Congress have finally been confirmed, implying that the decision makers of the Chinese government determined that situation is the safe enough for the most important people. Moreover, additional fiscal and monetary stimulus is expected, which could further drive the whole economy forward.

Admittedly, risks still exist, especially with foreign demand staying weak and relationships between China and other countries turning sour as countries seek blame for the global outbreak. With the sabre-rattling between China and US, a potential repeat of the dreaded trade war does worries many. Overall, the economy in China remains in recovery mode and seems en route to pre-crisis levels, but one should not underestimate the potential risks.

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