When the second largest economy in the world, China’s, takes a hit, so do stock markets. And the country is facing more problems than the ongoing trade war with the U.S., in which some tentative movements have taken place.
China’s economy faltered last month among industry and consumers, according to the Wall Street Journal. The double-headed whammy saw the slowest industry production since 2016 and retail sales growth hitting a 15-year low.
Economists thought that government support through lower taxes, infrastructure project spending, and a push on banks to increase lending would improve the situation, but they didn’t.
One reason for slower growth is government efforts to head off shadow lending, reported Reuters. Shadow lending refers to loans that take place outside the banking system. The practice frequently involves lower safety margins, which can increase overall economic risk, according to the Brookings Institution. Tightening shadow lending reduces money available for companies to borrow, slowing growth.
The news from China came atop lower European growth forecasts yesterday from the European Central Bank. The one-two punch hit markets today. Japan’s Nikkei was down 2%, Hong Kong’s Hang Seng Index fell 1.6%, and the Stoxx Europe 600 was off by 1%.
A spokesperson for China’s National Bureau of Statistics said the country was still on track to achieve its economic targets for this year.
Worry has already spread to the U.S., where stock futures are sharply down. The S&P 500 and Nasdaq both are off by 1%, and the Dow seems ready to open 250 points down from yesterday.