Commentary: Investors Should Dismiss Anxiety Over China
Despite the tumbling of stock markets, investors should their unnecessary anxiety over China because the long-term prediction for China’s economy still remains rosy and Beijing has the will and means to avert a financial crisis.
The Chinese stock markets had their two worst days in eight years with the benchmark Shanghai Composite Index tumbling 8.4% Monday and continuing to lose another 7.6% Tuesday, crashing to its lowest mark since December 2014. It is the 1st time in 10 months that the index has been below 3,000 pts.
The plunge of stocks, the depreciation of China’s RMB Yuan, and its slowing growth pace after years of high-speed development have all put a question mark on the health of the world’s second largest economy.
Such a worry is completely unnecessary.
China’s economy will remain robust and the positive prediction on its future should not be affected by the current fluctuation of stock markets.
Economists believe that the capital market has been over-reacting to the slowdown of the Chinese economy, which is caused in part by the Chinese government’s decision to transform the current economy into a more efficient and sustainable one.
Their positiveness was echoed by world leaders such as French President Francois Hollande and German Chancellor Angela Merkel, who have conveyed their confidence in China’s ability to surmount the current difficulties.
In addition, despite the weak performance of manufacturing and real estate, the rapid growth of the service sector is becoming the new highlight of China’s economy.
As China has been the most powerful propeller of the world economy in the past few years and at present the world has not seen another alternative for China’s role anytime soon, the unwarranted anxiety on China’s economy can only bring more damages to the global economy.
And to exaggerate the problems of China’s economy can bring more uncertainties to the world economy, disturb the financial markets and eventually slow down the pace of recovery for all countries.
While the Shanghai Composite Index stumbled, stock markets in other major economies, such as the United States, Japan, Germany and many others, also went through a dramatic dive on Monday.
For this new round of financial fluctuation, the fall in Chinese stock markets only served as a starter, with the real causes being the slow recovery of world economy and a possible rate hike from the US Federal Reserve.
However, it also shows that how important the Chinese economy is to the world and how closely today’s global markets are inter-connected.
And for that reason, international investors should calm themselves down and drop their unfounded anxiety over China’s economic future.
By Wang Shang
Paul Ebeling, Editor
HeffX-LTN
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