Why Chinese economy is slowing down

Chinese tech companies are no longer attractive for foreign investors. While Softbank exited from Alibaba, Warren Buffet's Berkshire Hathaway sold its stake in electric vehicle maker BYD.

New Delhi, Dec 29: China is not only facing a fresh wave of Covid but the world's second-largest economy is slowing down and that too at a great pace. Where the last 30 years have been the Chinese years of unprecedented growth, the coming decades do not have that potential for sure. The economic slowdown of China has also sent alarm bells ringing around the world as technically it is still the 'world's factory'.

Chinese Heng Seng recently went below even India's Nifty for some days. Just a couple of years ago, it used to be more than double of what Nifty used to be. This factor alone indicates that the Chinese stock market is no more lucrative for the investors and India's Nifty is doing extremely great. This also raises another question: Would the investors, who have invested in China, now turn to India?

Downtrend began before the pandemic

The Chinese decline is quite visible when compared to India. Just two years ago when the two economies tried to get a lease of life after Covid, both started on similar notes. But now, India's stock market is unchanged in dollar terms while there is no positive trend in the Chinese stock market. There are not many investors who could help them go up.

The Chinese reality today is the country in a deep crisis and there is no hope of any quick recovery as it has imposed restrictions on 'over-borrowing'. It has been too severe an act that has run havoc on the real estate companies as they started defaulting in the later part of 2021. Moreover, Chinese tech companies are no more attractive for foreign investors. This could be seen from Softbank's exit from Alibaba.

Similarly, Warren Buffet's Berkshire Hathaway sold its stake in electric vehicle maker BYD. Similarly, another tech giant Tencent witnessed the withdrawal of more than $7-bn worth of investments in the later part of the year.

Investors fleeing China

International investors sold $9.45-billion worth of shares in the two months of September and October this year. Similarly, Norway's $1.3-trillion sovereign wealth fund decided not to go ahead with their investments. According to 'The Economist', foreign investors are fleeing China and Xi Jinping's policies are having a profound impact on the markets-and a painful one.

This sums up what is wrong with China. Although President Xi has made sure he lasts as Chinese 'emperor' for all his life, this has spooked investors from around the world.