The Chinese Market Mystery

While China’s economy is showing strong signals of recovery, its market performance remains weak. By implementing gradual financial reforms that support impending economic developments, China's new leadership can bolster the country's market performance to reflect its economic strength.

SHANGHAI/NEW YORK – China’s economy is showing strong signs of recovery, with fourth-quarter data indicating a rebound across all sectors. But, while the country’s burgeoning recovery recently lifted consumer sentiment to a five-month high, the country’s stock-market performance has remained weak.

Indeed, in late November – after a year of accommodative measures and mini-stimulus policies – the Shanghai Stock Exchange (SSE) Composite Index closed below 2,000, for the first time since January 2009. Less than a month later, Chinese shares rose by 4.3%, bolstered by the index’s largest single-day gain since October 2009, a reflection of rising confidence inspired by strong manufacturing data. But, when the World Bank raised its forecast for Chinese economic growth in 2013 to 8.4%, the index closed flat, at 2,162.

The SSE ended 2012 with a 3.17% up-tick, and it is currently close to 2,280. But, if China’s economy is rebounding, why is its equities market responding slowly – and at times negatively – to strong signs of recovery?

To continue reading, please log in or enter your email address.

Registration is quick and easy and requires only your email address. If you already have an account with us, please log in. Or subscribe now for unlimited access.

required

Log in

http://prosyn.org/DrIUX3s;
  1. An employee works at a chemical fiber weaving company VCG/Getty Images

    China in the Lead?

    For four decades, China has achieved unprecedented economic growth under a centralized, authoritarian political system, far outpacing growth in the Western liberal democracies. So, is Chinese President Xi Jinping right to double down on authoritarianism, and is the “China model” truly a viable rival to Western-style democratic capitalism?

  2. The assembly line at Ford Bill Pugliano/Getty Images

    Whither the Multilateral Trading System?

    The global economy today is dominated by three major players – China, the EU, and the US – with roughly equal trading volumes and limited incentive to fight for the rules-based global trading system. With cooperation unlikely, the world should prepare itself for the erosion of the World Trade Organization.

  3. Donald Trump Saul Loeb/Getty Images

    The Globalization of Our Discontent

    Globalization, which was supposed to benefit developed and developing countries alike, is now reviled almost everywhere, as the political backlash in Europe and the US has shown. The challenge is to minimize the risk that the backlash will intensify, and that starts by understanding – and avoiding – past mistakes.

  4. A general view of the Corn Market in the City of Manchester Christopher Furlong/Getty Images

    A Better British Story

    Despite all of the doom and gloom over the United Kingdom's impending withdrawal from the European Union, key manufacturing indicators are at their highest levels in four years, and the mood for investment may be improving. While parts of the UK are certainly weakening economically, others may finally be overcoming longstanding challenges.

  5. UK supermarket Waring Abbott/Getty Images

    The UK’s Multilateral Trade Future

    With Brexit looming, the UK has no choice but to redesign its future trading relationships. As a major producer of sophisticated components, its long-term trade strategy should focus on gaining deep and unfettered access to integrated cross-border supply chains – and that means adopting a multilateral approach.

  6. The Year Ahead 2018

    The world’s leading thinkers and policymakers examine what’s come apart in the past year, and anticipate what will define the year ahead.

    Order now