In the Middle Kingdom, all is not well. GDP growth in 2023 is set to reach one of the worst levels since 1990 (excluding the Covid years), expected to be between 4.7% and 5.2%. The real estate slowdown continues for the 3rd year: house prices and new home sales are on a downward trend. Reflecting the slowdown in global demand, exports are sluggish. Domestic consumption is just beginning a timid rebound, to the benefit of savers' hoarding.

Retail sales - China (Source: Forex Factory)

Deflationary pressure is similar to that seen during the Asian crisis of the late 1990s (CPI, the consumer price index, stood in December at -0.3% year-on-year, extending the downturn initiated in the summer of 2023), and consequently adding to the debt burden.

The labor market is in poor shape (with youth unemployment hitting a record high, for example), and wages are contracting. Beijing's restrictions on certain key sectors, such as technology, are slowing investment. Industrial production is just managing to return to pre-pandemic levels.

Chinese industrial production (Source: Forex Factory)

All these difficulties are now palpable on the country's financial markets. Both at home and abroad, investors are showing a preference for other markets. The sharp fall in the country's major indices over the past few weeks bears witness to this.

As usual, Beijing has decided to bring out its armed forces. First of all, the Chinese authorities have "asked certain large institutional investors to suspend stock sales on certain days. In so doing, they briefly boosted the CSI 300 at year-end 223. Sales were only postponed, and the stock plummeted again.

Then they turned their attention to small mutual funds and brokers, before reversing themselves: the meagre gains were immediately wiped out. Restrictions were re-imposed. A few small measures, aimed at reducing transaction costs, had only a fleeting effect. So it was time to get out the wallet: the central government's investment funds multiplied their purchases. But to no avail: the market was distorted, and confidence in it permanently blurred. The fall in prices spread, and began to worry small investors.

According to China's market insiders, the government still has a few trump cards up its sleeve to play in the event of widespread panic. In the meantime, a new salvo of statistics will be published this evening, and should nevertheless mark an improvement on the very weak fundamentals. Will the upturn spurred on by Beijing be real? We'll have the answer in a few hours' time.