Market comment 2023

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As Dhaval Joshi of BCA Research points out, China has generated 41% of the world’s growth in the past 10 years, almost double the 22% contribution from the US, and dwarfing the 9% contribution from the euro area..

Since 2015, bank deposits as a share of China’s GDP have risen by 50%. Private-sector consumption of durable goods is down by about a third versus early 2015, and has continued to decline since the reopening of the economy rather than rise as a result of pent-up demand. Private investment is down by two-thirds since the first quarter of 2015, including a decrease of 25% since the pandemic started.

“Those trends reflect people’s long-term economic decisions in the aggregate, and they strongly suggest that in China, people and companies are increasingly fearful of losing access to their assets and are prioritising short-term liquidity over investment,” Posen says. These fears, he adds, have been heightened by the severity and unrelenting nature of China’s lockdown.

China is too big for a Soviet Union-style collapse, but it’s on shaky ground