Recent weeks have seen a slowdown in China economic activity, which has caused Hong Kong’s share markets to teeter on the edge of the bear market.
That’s also terrible news for American businesses with significant exposure to China; if things become worse, a lot of S&P 500 corporations will be first in line for harm.
Posing Risks for US Companies with China Exposure
After three years of draconian influenza restrictions, China’s quick economic reopening in December was heralded as a catalyst that would accelerate the global economy.
According to most latest predictions from the International Monetary Fund, the world’s second-largest economy will be responsible for around 35% of the growth in 2023 due to pent-up consumer demand and a revival of manufacturing.
Positive results have come from China’s reopening: in February, factories had their best month in over 11 years, and the nation’s economy expanded by 4.5% in the first quarter of the year.
Recent research, however, suggests that this optimism might have been transitory.
May saw a 7.5% year-over-year decline in Chinese exports as the world economy struggled. According to recent data, China is also dealing with lower-than-anticipated consumer spending, sluggish manufacturing, and lackluster housing sales.
As per official figures, the rate of youth unemployment in metropolitan areas has reached a historic high of 20%.
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Market Volatility Rises as Geopolitical Tensions
Investor jitters and market volatility is being caused by rising geopolitical tensions between Washington and Beijing.
Multinational corporations are concerned about a recent crackdown on US consulting firms like Bain, Capvision, Mintz Group, and Micron Technology (MU), according to US Ambassador to China Nicholas Burns.
For the first time in more than 60 years, China, which is home to more than 1.4 billion people, experienced a decline in population in 2022.
Lower consumption results from a declining population.
Global stocks were volatile when Beijing made the decision in January. The Nasdaq Golden Dragon Index, which tracks Chinese companies on US exchanges, dropped by 4% while the Dow dropped by 300 points.
Read more: China’s Stock Market Halts Decline As Investors Assess $446 Billion Loss In Value
