China's economy is facing a collapse that could affect major global stock markets. This situation creates fear because it may affect world stock markets. Experts underlined that the Chinese economy, the second largest economy in the world after the USA, has experienced a rapid free fall in recent months. The most feared scenario right now is that it could create a devastating domino effect on the stock markets. These possibilities trigger many behaviors and bring stagnation with them.
According to official figures, exports in August decreased by 8.8% compared to 2022 and declined for the fourth consecutive month. While the share of imported goods reached 21.8% in 2017 and 2018, it remained at only 14.8% this year as a result of the decline again.
Data from J P Morgan earlier this month showed investors dumped a whopping $12 billion from major stocks. Economists warn that the Chinese economy is on the verge of collapse and that a "serious and long-term" crisis may soon occur.
Russ Mould, investment director at AJ Bell, warned that this could trigger a "wave of passive selling" in stock markets.
There are also experts who think that the only solution is for China to sacrifice the yuan in order to avoid falling into a vicious circle of possible debt, recession or deflation.
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