Right
now, most of the world’s attention is focused on the United States, and
understandably so. From Trump’s trade wars to attempts to replace Jerome
Powell’s refusal to lower interest rates, geopolitical tensions, and with a new
earnings season just kicking off and affecting
the S&P 500, there is no shortage of headlines.
However,
the world is not just about the United States. Interesting developments are
also taking place elsewhere, especially in China. And no, we’re not just
talking about toy maker Pop Mart, which expects its revenue to rise by at least
200% and its net profit by 350% year-on-year in the first half of the year.
The real
story is that the Chinese economy continues to hold up. According to data
released Tuesday, the country’s GDP grew 5.2% year-on-year in the second
quarter, a slight slowdown from 5.4% in the first quarter, but still above
expectations of 5.1%. In short, there is no fall off the cliff because of trade
wars.
What
keeps things afloat?
Mainly
exports. Amid trade
tensions, U.S. importers had been stockpiling Chinese goods, but
that boost is quickly fading. As exports to the U.S. and EU decline, overall
export activity will likely weaken in the second half of the year. This could
further slow China’s GDP growth, making it even harder to hit the 5% full-year
target.
To
offset the possible drop in exports, China will need to boost domestic
consumption, which remains weak. The consumer savings rate remains high. Option
B would be to increase economic stimulus, something investors have been waiting
for months and which has not yet arrived.
So, what
could we expect from the Chinese market?
The CSI
300 continental benchmark index reflects investors’ concerns about growing
geopolitical risks, not only with the United States, but also with Europe,
which recently accused China of having “the largest trade surplus in human
history.” No wonder Xi Jinping decided not to attend the upcoming EU-China
summit.
At the
same time, concerns about deflation persist in China. In June, consumer
inflation was just +0.1% year-on-year, while producer prices fell by 3.6%.
These figures, combined with persistently weak consumer confidence and the
continued decline in house prices, put additional pressure on sentiment.
Meanwhile,
Hong Kong’s stock market is performing relatively well. Investors are showing
renewed enthusiasm for technology companies such as Alibaba and Tencent, which
are listed in Hong Kong and are not subject to the same domestic pressures. DeepSeek’s launch further
boosted its recent gains.
This article was written by FL Contributors at www.forexlive.com.