China’s Economy Is Improving but the Stock Market Says It’s Not Fast Enough

1 min read

Yet another round of grim Chinese economic data, yet another day of declines for China-exposed stocks. Despite signs that the world’s second-largest economy is improving, investors don’t seem to think it’s anywhere near fast enough.

Worries over a slowdown in China have rattled global markets in recent months, even weighing on the
S&P 500,
and hitting stocks exposed to Chinese consumers—like e-commerce giant
(ticker: BABA) and luxury group
(MC.France)—hard. Little changed on Friday after the latest economic data out of China showed that the country still faces growth headwinds, though the severity may be easing.

The Chinese consumer price index (CPI) was flat on an annual basis in September. This was short of expectations of 0.2% growth according to economists surveyed by FactSet, and exhibited deflation from August’s 0.1% print. The producer price index (PPI) measure of inflation fell 2.5%, worse than expectations of a 2.3% decline but still picking up from a 3% slide in August.

Chinese imports—an important barometer for domestic demand—tumbled 6.2% on an annual basis last month, below expectations of just a 6% decrease but an improvement from August’s 7.3% decline. Chinese exports, which can signal global demand for Chinese goods, also fell 6.2%, not as bad as the 8.3% decrease expected and a stark improvement from the 8.8% drop in August.

There are signs of some improvement in the data, but “the Chinese economy could certainly do with some help if today’s September economic numbers are any guide,” said Michael Hewson, an analyst at broker
CMC Markets.
“There has been little indication that the Chinese economy is close to achieving a significant pickup in economic activity … imports have fallen for every month this year highlighting the challenges facing the Chinese government in stimulating domestic demand.”

The reaction in the stock market was clear, at least. Hong Kong’s
Hang Seng Index
retreated 2.3%, snapping a six-day winning streak that was the benchmark’s longest since late 2021.
shares declined 0.9% in U.S. premarket trading.
stock shed 0.6% in Paris.

Gloom continues to hang over the country’s economy, to say nothing of the risk of a financial crisis in its indebted property sector. While there remain reasons to be bullish on Chinese stocks, the latest data seem to have investors saying “not just yet.”

Write to Jack Denton at [email protected]

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