US and European companies have rushed to sell cars and a multitude of other products to China’s fast-growing middle class. China accounted for more than half of Apple’s revenue growth in the fiscal year that ended in September.
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And for those of us watching around the world, there’s come the realisation that what goes on in the world’s second biggest economy has a very real impact on our lives.
Clearly the circuit breaker is having the opposite affect to what is intended and is making things worse. “It causes large market volatility as people in markets don t like uncertainty”.
But in the past 24 hours some relief.
Major Chinese stocks today bottomed out after the securities regulator chose to terminate the controversial “circuit-breaker” mechanism that has halted trading twice this week, including after an abrupt sell-off yesterday that led to heavy losses and spooked global markets.
Foreign investors have limited ownership of Chinese stocks because the country’s financial system is still largely fenced off from the world.
The US stock markets also tumbled overnight owing to the trading suspension at the Chinese stock market. One big reason is the weakening yuan.
The Shanghai Composite closed 2% higher on Friday, while the Shenzhen Composite added 1.1%.Still, the week saw steep losses. But on Friday the central bank set the guidance rate higher at 6.5636 per dollar and intervened to support the spot rate via state-owned banks, which some market watchers hoped was a signal that it would not let the currency slip much more for now. It is meant to be a guiding rate for the way in which it wants the yuan to trade. It was cut 1.42 per cent over the last eight days.
Why was it then allowed to strengthen? However, the yuan’s unexpectedly sharp slide has roiled currencies, stocks and commodities around the world this week, stirring worries that China’s actions would trigger competitive devaluations by its trading partners, each intending to safeguard its exporters.
The Chinese central bank also took steps to reinforce the yuan following the weakness of the money was taken as an indication of issues for the market. If the New Yuan Loans data to be released next week comes out worse than expected, it can trigger a new round of panic in the stock market. Combined with a bearish outlook for stocks and capital outflows, however, our outlook on the yuan remains negative through the coming week. Households were also less optimistic about the economy than three months ago, the survey showed on Friday, underscoring the fragile nature of Japan’s recovery.
A slowdown in China is seen as a threat by many investors because the country has been the main engine of global economic growth for years.
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The government s attempts to appease the nation s army of retail investors comes just a month ahead of the Chinese New year celebrations, a time when hundreds of millions of people travel for traditional family gatherings.
