Blame for the sell-off of China’s stock market has been levelled at the Sino-US trade war but Beijing’s problems have been evident for some time and run much deeper.
Long before US president Donald Trump imposed billions of dollars in tariffs against China, a steady drip of credit tightening and middling Chinese economic data underpinned the selling, with the tariff rhetoric just amplifying the gloom.
China’s key stock market index, the Shanghai Composite, has now tumbled into bear market territory for the first time in more than two years, falling another 1.1 per cent on Wednesday.
The last major sell-off at the start of 2016 was driven by a clutch of bad economic indicators. This time analysts say a multitude of concerns for China — from a mounting trade war with the US and failing overseas projects, to tighter credit and a pullback from institutional investors — has spurred the abrupt cooling of investor sentiment for shares.
“The A-share [domestic Chinese stocks] market began underperforming before the announcement of tariffs,” said Ting Gao, head of UBS China equity strategy. “The materials, industrial and property sectors are down a lot — they [investors] are pricing in a fairly deep growth problem.”