Earlier this week, Xi spent nearly two hours on the phone with President Joe Biden, striking a markedly friendlier tone than before. This comes after November’s San Francisco summit, in which Xi promised all sorts of goodies to the US and left analysts wondering what on earth China got in return.
Things aren’t happy at home. The economy has been in the doldrums since real estate giant Evergrande defaulted spectacularly on its debt in 2021, or perhaps the downturn started during Trump’s trade war before then.
The extraordinary zero Covid years didn’t help, and the widely-expected post-Covid recovery has barely materialised, with consumer and business confidence at an all-time low.
Last summer, before the Communist Party stopped publishing the figures, over a fifth of Chinese young people were unemployed. When I was in Shanghai earlier this year, attending a business summit, the only bullish investors (Chinese or international) were those with a stake in electric cars.
There are, of course, still bright spots in China’s present and future. Renewables is one of them – Chinese EVs are set to take a quarter of European sales this year.
When I interviewed the then foreign secretary James Cleverly at Conservative Party Conference last year, he told me that China’s slowing growth was bringing it back to the negotiating table. I was sceptical then, but in the months since we’ve seen more evidence that something of the sort really may be happening.
Over the past three years, nearly $5 trillion has evaporated from the combined market capitalization of mainland China and Hong Kong. The market is significantly shrinking as global investors’ trust fails to recover. In contrast, the Indian stock market, classified as an emerging market, has risen to the world’s fourth-largest market over the last eight years.
According to an analysis by the American financial media outlet CNBC, based on HSBC data, the total market capitalization of companies listed in mainland China and Hong Kong has decreased by $4.8 trillion over the past three years since 2021. This is comparable to India’s total market capitalization of $4.63 trillion. According to data from the World Federation of Exchanges, the Indian Stock Exchange overtook the Hong Kong Exchange in January to become the third-largest in Asia.
The Chinese stock market has recently been characterized by a bear market. Mainland China’s CSI 300 index has fallen for three straight years, closing out with a decline of 11.4% last year. Hong Kong’s Hang Seng index performed even worse, with 2023 being its fourth consecutive decline, ending the year 13.8% lower. Both were the bottom performers among major Asia-Pacific indexes last year.