Current recorded account balance in China

China’s Economy

Introduction
For this assignment, the focus of the discussion was on the China stock exchange, which has had its fair share of instability since the Covid-19 outbreak. One interesting fact about China is that it’s the second largest economy in the world despite being the hardest hit by Covid-19 and its different variants that come later. Its progress is picking up but at a slower rate than expected. The question below responds to the gaps in China stock exchange market.
1. China’s GDP progressed to 3.9% in the third quarter of 2022, surprising the market consensus of 3.4% and received boosting from Beijing to revive activities from quarter two, which was 0.4%. China’s GDP per capita averaged $2589.56 in the period between 1960 to 2021, and the heist level reached $11188.30 in 2021. Moreover, China’s debt to nominal GDP accounted for 20.3% by June 2022 compared to the previous quarter, which was 19.9%.
Figure 1: GDP Progress

Figure 2: GDP Per Capita

Figure 3: China’s Debt

2. China’s currency, the yuan, is pegged to the U.S dollar
3. By October 2022, China’s inflation rate was 2.1% compared to the previous year’s month. The inflation rate is to pick up at a moderate level. The annual rate of inflation leveled at 0.9% in 2021.
Figure 4: China’s Inflation Rate as of October 2022

4. The current recorded account balance in China as of September 2022 was 144.0 USD bn. This is in comparison to the previous quarter’s surplus of 77.5 USD bn, which averaged 42.4 USD bn.
Figure 5: China’s Account Balance
5. China’s 10 years government bond has a profit of 2.743. This was rated as A+ concerning the standard and poor agency. China’s economy placed the central bank rate at 3.65%as of August 2022.
Figure 6: Chin’s Yield – 2022

6. China’s population estimate is 1,410,539,758, the unemployment registered for urban unemployment is 5.5% as of September 2022, their poverty rate is at 0.6%, and the life expectancy at birth is at male at 75 years while females at 80.7 years
7. China’s corporate tax rate is 25%, while the personal tax rate is 45% based on taxable income.
8. Data records of 2022 show China’s largest companies to be TENCENT 1TCEHY, KWEICHOW MOUTAI 2600519.SS, and ICBC 31398.HK. the largest industries include Copper Ore Mining, Building Construction and Online Shopping all in China. Its major exports are Integrated Circuits, Other Cloth Articles, Broadcasting Equipment, Computers, and Office Machine Parts.
9. China is a communist party-led state, a centralized form of authoritarian government in its rule led by a single party.
10. On the Heritage FOUNDATIONS 2022, China’s economic freedom score is 48.0, placing it at 158. Of the 39 Asian-Pacific countries, China is ranked 35 out of 39.
11. According to international transparency data of 2021, China scored 45 points over 100 in the Corruption Perception Index.
12. Currency, Market and Companies Performance
During the semester, I kept track of Alibaba Group Holding’s stock price progress. The company’s forecasted future earnings are currently at 15.8%, while historically, its growth rate has been at 9.8%. To increase their profits, they monitor their financial position analysis that indicates where they stand and what is to be achieved in the short and long term. Notably, the stock price has been fluctuating, but I can relate to the financial recorded data showing that China’s yuan significantly dropped against the dollar in offshore trading. The business media discussion I tracked shows that this added to the recent currency decline against the greenback. The yuan traded out of mainland China dropped to 7.2386 against the dollar from September to November 2022. On the other hand, the onshore yuan traded in mainland China dropped to 7.2302 against a dollar in the earlier trading, considered the weakest level reached since 2008. Following up on the currency, the Central bank of China developed moves that could stem the yuan drop by making it more costly to gamble against the currency. Due to Covid-19 lockdowns, droughts and the indebted property market slump, Chain’s economy shows signs of being battered. However, it largely avoided contractions in their second quatre leading to the expansion of the GDP by 0.4%.
Observing the 2022 trends of China’s economy, it was evident that there was an expected slow pace despite the strong start in early 2022. Covid-19 impact on the economy disrupted the normalization process in which the GDP was expected to slow by 4.3% in 2022 to 0.8% less than what had been projected in December Chinas Economic Update (Fernandes, N. 2020). This was a true reflection of the lockdown in several parts of China due to the Omicron outbreak. Initiatives that contributed to aggressive policy stimulus were expected to mitigate the downtown of the economy in the second half of 2022. However, this would prove difficult if China continued restricting movement in certain regions. Notably, if more variants of covid-19 continue to emerge, China will continue to expect lengthy economic disruptions.
Beijing’s zero Covid-19 policy is taking a toll on listed companies in Shanghai, Shenzhen and Beijing. The listed companies released their half-year earnings, and the finding was disastrous. 53% of 4,800 companies had a drop in profits, as stated in the two major financial institutions of the country(Fernandes, N. 2020). This can be related to 2020 when the company earnings were at their worst as the country stood still after the Covid-19 outbreak. Compared to 2020, in which 780 companies lost money in the first six months, this year was worse as 900 companies lost their monies. This effect was felt worldwide since China is the second largest economy and its companies are the biggest purchases of commodities, technology and products worldwide. Notably, tech companies are among those suffering. At the same time, three significant airlines recorded losses of $7.2 billion combined in the first half year.
Despite China’s economic up and downs, it continues to offer a better market growth potential due to its labor force that is skilled and advanced infrastructures. Its investments are mostly based on its capabilities as a manufacturing base for future industries. Investing in China may be more complex, but no other country can rival China. Over the years, investors have handled numerous challenges, including the trade war with the United States, erratic technological crackdowns, and the pandemic disruption that affected the education sector. Despite this, China remains the better investment country for several international businesses. Despite the limitation, the country still takes the second position in the world economy. It holds significance in the consumption, and manufacturing market and its business model keeps advancing and is innovative.

References /Links

https://edition.cnn.com/2022/09/02/investing/china-worst-earnings-season-zero-covid-intl-hnk/index.html

https://tradingeconomics.com/china/gdp
https://www.statista.com/statistics/271667/monthly-inflation-rate-in-china/
https://tradingeconomics.com/china/current-account
http://www.worldgovernmentbonds.com/bond-historical-data/china/10-years/
https://www.cia.gov/the-world-factbook/countries/china/#economy
https://tradingeconomics.com/china/corporate-tax-rate
https://www.ibisworld.com/china/industry-trends/biggest-industries-by-revenue/
https://www.cia.gov/the-world-factbook/countries/china/#economy
Fernandes, N. (2020). Economic effects of coronavirus outbreak (COVID-19) on the world economy.