China’s stock market has suffered losses of more than $6 trillion as the economic crisis deepens

China’s stock market has lost a staggering $6.3 trillion since peaking three years ago, entering 2024 with more of a cry than a roar.

Meanwhile, the world’s second-largest economy continues to face the same headwinds of the past few years, even after the Chinese government reported it had achieved its 5% GDP growth target.

Deflationary pressures, geopolitical uncertainty ahead of the 2024 US presidential election, economic slowdown, and the country’s debt-laden real estate market, where 70% of household assets are tied up in real estate, have weakened investor confidence. is getting cold.

Earlier this month, the Tokyo Stock Exchange overtook Shanghai to become Asia’s largest by market capitalization.

Last week, Indian stocks soared, with a valuation premium of 157% over Chinese stocks. This reflects a clear shift in investor preferences between the world’s second and fifth largest economies.

The Hang Seng China Enterprises Index (HSCEI), which measures the overall performance of Hong Kong mainland securities, has experienced a significant decline over the past five years, losing more than half of its value. This downward trend continued last month, with HSCEI falling another 11%.

The FTSE China 50 Index, which consists of China’s 50 largest and most liquid stocks, has fallen 6.44% over the past five days.

China’s woes run counter to the global trend of stock prices recovering, supported by confidence in Wall Street, amid a tech boom and expectations of lower interest rates from the U.S. Federal Reserve.

The S&P 500 index rose 24% last year, hitting an all-time high.

newsweek We have asked the Chinese Ministry of Foreign Affairs for comment in writing.

Last week, at the World Economic Forum in Davos, Switzerland, China’s No. 2 Premier Li Qiang vowed to achieve the 5% gross domestic product (GDP) growth target without resorting to “massive stimulus”. He underlined the country’s commitment and emphasized its prudent approach amid economic challenges. .

Investors had been hoping for a rate cut on Monday to deal a blow to China’s slowing economy. However, it was disappointing that the country’s central bank chose to maintain medium-term policy rates.

The move is likely to have contributed to a further decline in stock prices and will do little to attract foreign investors who are already gradually exiting the country. Last year was the first time in more than a decade that foreign investment into China shrank.

China, like its East Asian neighbors, is grappling with declining birthrates, and a looming demographic time bomb has been cited as a future pitfall for the country’s economy.

However, financial analyst Mark Hulbert suggests that this demographic challenge will not negatively impact Chinese stocks for at least 20 years, based on industry trends.