Beijing (AsiaNews) – Asian stocks saw sharp falls on Friday as mounting concerns over China's slowing economy continued to affect global markets.
China's Shanghai Composite index led the decline with a 4.27 per cent drop, followed by Tokyo (-2.98), Seoul (-2.01) and Hong Kong (-1.53). Wall Street also lost about 2 per cent yesterday.
Although European shares also continued their downward slide, burdened by Greece’s upcoming elections, China’s economy remains the main source of global worries.
The Stoxx Europe 600 Index entered a correction, losing 5 per cent since China’s central bank devalued the yuan last week and pumped US$ 19 billion into various financial institutions through its medium-term lending facility to maintain liquidity in the banking system.
The US Federal Reserve, which is closely monitoring the slowdown in China’s economy, is getting close to raising interest rates for the first time in nearly a decade, perhaps in September.
Analysts agree that the slowdown in Asia’s economy is a direct result of declining Chinese exports.
As shares plunge, the yuan is devalued, the real estate bubble starts to show signs that it might burst, and exports tumble by 8.3 per cent in July, China’s economy seems to be running out of steam, this according to Goldman Sachs.
Experts note that the critical situation is due to a structural shift underway from an export-driven economy to what centred on domestic demand.
For the deputy chief of China’s central bank, China is planning reforms to reduce its dependence on foreign markets for economic growth.
As manufacturing contracts, capital investments, especially by the government, become even more important for the economy. They already represent more than half of GDP.
However, in the first seven months of the year, fixed capital investments reached their lowest point since 2000, primarily because of real estate. About a fifth of all new homes cannot find buyers, and this has had an inevitable impact on overall sales, which have been declining for the past 13 months.
According to the Financial Times, employment levels have also dropped for the first time last month since 2012, despite government spending on infrastructures.