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China’s economy is reeling, and that may be bad news for Wall Street.
From a slowdown in commercial production to falling import and export levels, investors are pricing in early signs that Beijing is struggling to revive expansion after ending its strict zero-COVID restrictions expired last year.
The People’s Bank of China has responded by slashing key interest rates, hoping that declining loan prices will fuel falling spending levels.
But even those measures failed to appease investors, with the benchmark CSI three-hundred-year inventory index falling 0. 2% last week after the bank cut loan repayment rates.
And China’s stalled expansion may soon become a sore spot for U. S. stocks. The U. S. also started the year with a dizzying gap.
The AI craze has fueled a huge rally in mega-cap tech stocks like Nvidia and Microsoft, with their colossal percentage rise in value lifting the benchmark S index.
But many of the soaring stocks are doing big business volumes in China, and their profits are likely to suffer if the PBoC’s most recent efforts fail to spark a recovery.
Big tech giants Nvidia and Tesla are on a list of the 25 indexed companies most exposed to the world’s second-largest economy, according to a list released by Bank of America earlier this year.
Apple and Ford also manufacture gigantic amounts of products in China, while Nike and Starbucks make a significant portion of their profits from retail sales.
Chinese corporations indexed in the U. S. U. S. e-commerce stocks are already suffering from the slowdown, with e-commerce stocks JD. com down 35% so far this year.
It’s been straightforward for investors to downplay China’s slowdown as a problem for stocks so far this year, with markets booming thanks to synthetic intelligence and investors expecting the Federal Reserve to start cutting interest rates soon.
But with the resurgence of expansion a buzzword for most sensible strategists, don’t be surprised if China’s economy soon becomes a priority issue.
Read more: China’s economy is more screwed up than we thought