Analysis: Why China’s Markets Are Rallying While the West Worries About Debt
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The market, effectively counterbalanced by policy measures, experienced a strong rebound in expectations during the third quarter.
First, in contrast to a weak economic recovery, China’s yuan-denominated financial markets showed a strong improvement in sentiment during the third quarter. The GDP growth rate was 4.8% year-over-year, with domestic demand growing at 3.6% and contributing 75% to overall economic growth. Yet the GDP deflator remained in contractionary territory, posting its 10th consecutive quarter of negative growth with an average decline of 0.8%. The Consumer Price Index has also been negative for three straight quarters. Affected by low price levels, the economy saw a slight downturn.
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- China’s financial markets rebounded strongly in Q3 2024, with GDP up 4.8% year-over-year and a 13% rise in the Shanghai Composite Index, despite ongoing deflation.
- Yields on 30-year bonds in major developed economies climbed, amid record-high government debt ratios (e.g., U.S. 114%, Japan 211%), reflecting fiscal sustainability concerns.
- Gold prices hit record highs, driven by central bank buying and investor diversification, signaling widespread unease about future global stability.
- Cambricon
- Cambricon is noted as one of China's popular tech stocks within the A-share market. It is mentioned in contrast to America's "Magnificent Seven," highlighting the rise of domestic tech companies in China.
- China Construction Bank
- Zhang Tao and Lu Siyuan, authors of this article, are part of the Financial Markets Department at China Construction Bank. The article discusses significant shifts in global financial markets, including the rebound of China's yuan-denominated markets, rising government bond yields in developed economies, and record-breaking gold prices.
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