Daily Brief: China’s Looking Frail Next To Hale and Hearty Neighbors

Daily Brief: China’s Looking Frail Next To Hale and Hearty Neighbors

over 1 year ago3 mins

Projections out on Tuesday suggested that China’s growth will fall behind the rest of Asia for the first time in over three decades.

What does this mean?

In the immediate wake of Covid, China seemed to be at the forefront of the world’s recovery from the pandemic. But a lot has changed since then: the country’s strict zero-Covid approach – which depends on snap lockdowns and mass testing – has restricted movement and left consumer activity pretty depressed. And when you consider too that China’s all-important property sector – which makes up about 30% of the economy – is taking a worse bruising than Olivia Wilde’s “Don't Worry Darling”, it’s no wonder the World Bank now predicts the Chinese economy will grow just 2.8% this year. For the rest of Asia, though, things look comparatively rosy: high commodity prices (good news for exporters) and a strong rebound in domestic demand mean it’s expected to grow by a healthy 5.3% this year.

China Asia growth

Why should I care?

Zooming in: The world’s watching its wallet.

China’s woes don’t end there. You see, with recession fears (and in some cases, actual, full-blown recessions) setting in, China’s exports are taking a hit. That’s worrying for a country that typically relies on exports to fuel growth, but the numbers don’t lie: Shanghai’s port processed 8% less cargo this August compared to last August – a dropoff that’s contributed to plunging shipping costs from China, which are now at their lowest in over two years.

Shanghai shipping costs

The bigger picture: A silver lining for everyone else.

It’s a dog-eat-dog world out there, and China’s difficulties present the country’s trading partners with plenty of opportunities – specifically the countries China exports to. See, falling demand should ease some of the congestion that’s been plaguing global supply chains, while lower shipping costs could help to cool inflation globally too.

Keep reading for our next story...

No Deal Or No Deal In The Itty-Bitty M&A Market

MA image

Data out this week showed that global dealmaking has fallen off a cliff.

What does this mean?

The mergers and acquisitions (M&A) market began the summer on a record high, with eight back-to-back, breezy quarters of over $1 trillion in deals. But things have taken a turn since – and with only $640 billion in deals agreed since July began, we’re on track for M&A’s worst quarter since the pandemic brought dealmaking to a halt in 2020. “Disappointed but not surprised” – your parents’ catchphrase when you were a teen – probably captures the world’s reaction to the news pretty accurately. After all, fears of a recession mean companies are feeling weak-kneed about making big purchases, and dented share prices mean they’d have to sacrifice more of their stock than usual as payment. On top of that, loans are increasingly hard to come by – and expensive even when they can be found.

Deals fall

Why should I care?

Zooming in: Expect deals to fail.

Even private equity firms – which buy up companies in the hope of improving and reselling them later on – have gone out of vogue. Spurned by picky banks who are reluctant to fund their ventures, they’ve been turning to private lenders to plug the gap. Now, though, it’s clear that private lenders only have so much cash to give, and the spectacle of huge deals being delayed – or simply falling through – is becoming commonplace.

For markets: Asia’s holding firm.

The initial public offering market is in a similar sorry state at the moment but one way or another, Asia seems to be bucking the trend. This year, money raised through stock listings in Asia makes up a record 68% of the global total, versus a meager 14% in the US – traditionally the world’s busiest listings market. That said, some of Asia’s most impressive sums were raised by Chinese companies that got booted out of the US, like China Mobile and CNOOC.

IPOs in Asia
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