Will this year bring any cheer for China's markets?

China's double-digit growth rates of previous decades are long gone. Will the weakness continue?

Chinese exports fell to a three-year low last year
(Image credit: AFP via Getty Images)

“China is wading into troubled waters” in 2020, writes Plamen Tonchev for The Diplomat. The trade war put “enormous pressure” on the economy last year. Add in “toxic” indebtedness, and the double-digit growth rates of previous decades are “long gone”.

China’s CSI 300 stock index returned an impressive 36% last year, but the country’s sluggish economy is a global concern. Export growth slowed to a three-year low last year, say Alice Woodhouse and Tom Mitchell in the Financial Times. Imports fell by 2.8%. Yet matters improved at the end of the year. Exports advanced 7.6% year on year in dollar terms in December.

Chinese growth fell to three-decade lows in 2019. Will the weakness continue? asks Keith Johnson in Foreign Policy. A big slowdown would be bad news for other emerging markets. If China wants to stoke growth it can always turn to stimulus, but that only risks making one of the Middle Kingdom’s biggest problems, the debt load, even worse. Chinese debt accumulation picked up again in 2019 after slowing over the previous two years, says Silvia Amaro on CNBC. Overall debt is now nearly 310% of GDP.

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The world’s second-biggest economy “ended 2019 with record corporate bond defaults”, writes William Pesek in Nikkei Asian Review. More than 150 companies reneged on payments totalling about $19bn. That is small in relation to the size of the economy, but there is a “chain-reaction risk” if investors panic and pull capital out of bonds.

For all the challenges, 2020 could prove a fruitful year, says David Mann of Standard Chartered in the Financial Times. Deleveraging played a bigger role than the trade war in crimping growth in 2019, but a recent move towards “releveraging”, coupled with calmer trade relations, could help growth surprise on the upside.

Ben Judge

Ben studied modern languages at London University's Queen Mary College. After dabbling unhappily in local government finance for a while, he went to work for The Scotsman newspaper in Edinburgh. The launch of the paper's website, scotsman.com, in the early years of the dotcom craze, saw Ben move online to manage the Business and Motors channels before becoming deputy editor with responsibility for all aspects of online production for The Scotsman, Scotland on Sunday and the Edinburgh Evening News websites, along with the papers' Edinburgh Festivals website.

Ben joined MoneyWeek as website editor in 2008, just as the Great Financial Crisis was brewing. He has written extensively for the website and magazine, with a particular emphasis on alternative finance and fintech, including blockchain and bitcoin. As an early adopter of bitcoin, Ben bought when the price was under $200, but went on to spend it all on foolish fripperies.