Traders braced for fresh stock market falls as protests grip China
TRADERS were braced for a fresh fall in the Chinese stock market last night amid fears that protests across the country would deepen its economic turmoil.
The looming threat of a government crackdown was expected to dampen demand for Chinese assets such as stocks, commodities and currencies when markets open this morning.
Beijing authorities are facing the biggest wave of unrest in decades as students and workers take to the streets to challenge zero-covid measures in cities across China, and some even call for Xi Jinping, the president, to resign.
It is feared that the Communist regime will take draconian measures to end the protests, leading to further disruption after repeated lockdowns that have already damaged growth.
Ken Cheung, chief Asian currency strategist at Mizuho Bank in Hong Kong, said: “Sentiment may take a hit as the protests fuel concern over social instability in China, and foreign investors may trim exposure to Chinese investment.
“It appears that the zero-covid policy is reaching its tipping point. More easing or refinement on the Covid measures will be needed to curb discontent.”
China has sought to totally eliminate domestic coronavirus with an ultrastrict containment strategy that has forced businesses and consumers to repeatedly shut their doors over the past three years.
The country – which is also fighting to contain a property crash – has repeatedly flip-flopped on plans to open up.
China reported its fourth straight record day of new Covid infections yesterday when another 39,791 cases were detected. A record 412m people are currently under some type of lockdown measures according to analysis by financial services group Nomura.
Only two thirds of those over 80 have been vaccinated, while even fewer have received a booster, meaning many are inadequately protected against the omicron strain. Mark Williams, chief Asia economist at Capital Economics, said the surge in Covid cases would likely be reflected in services output and the construction sector.
In a note to clients, he said: “The ongoing outbreak is now the most widespread in China since the initial one.
“Our mobility tracker has fallen to its lowest level since May when Shanghai was still in lockdown. We think this will translate into a hefty fall in the services PMIS and worse is probably to come.”
Protesters took to the streets and social media over the weekend to object to China’s strict lockdown policy in a rare display of public defiance after nearly three years of strict Covid rules.
The demonstrations began after at least 10 people died in a fire in an apartment block that was under lockdown in the western city of Urumqi.
Many suspect virus restrictions prevented the victims from escaping their homes. The government denies this.
New official Chinese data show that overall profits for industrial businesses fell further in the period from January to October. Profits declined by 3pc compared with the same period last year, according to figures compiled by the National Bureau of Statistics.
The World Bank has predicted that China’s economy will lag behind other Asian countries. The country is also struggling with a debt payment crisis in the property market, as well as rapidly decreasing consumer spending.
The government has tried to intervene by ramping up support for developers, with the People’s Bank of China offering cheap loans to encourage financial companies to buy developer bonds. But the financing gap to complete stalled projects remains massive, according to Mr Williams.