Chinese Stocks Fall on New Tensions – Trustnodes

The Shanghai stock index dropped by more than 2% today in one of the biggest fall in a month.

In Shenzhen stocks fell 2.37% while the ChiNext Index fell 2.02% with state media there pointing to the planned visit to Taiwan by Speaker Nancy Pelosi as one reason for this drop.

It appears, so far, the response of the Chinese Communist Party to the visit will be economical, with some trade suspended while Weibo has pulled out of Taiwan.

Yet Chinese stocks began falling long before any planned Pelosi visit, with a downtrend developing for much of the past 30 days as can be seen above.

After a decade long rule by Xi Jinping, the Chinese economy is under significant pressure in great part because foreign investors are pulling out.

The move against Jack Ma in particular made it clear that China does not have a rule of law as we know it, nor does it have property rights even at a time of peace.

Reforms towards liberalization have stalled and reversed, with some in the west concerned that Xi wants to follow Vladimir Putin’s model of authoritarian governance and hostility towards liberalism.

China’s over-reaction to Pelosi’s visit adds to investor’s concerns in yet another sign of a policy towards non-accomodation.

All of which feeds into the economy as a gradual slowdown has coincided with Xi’s pivot from the five decades long policy of market reforms.

This pivot may become effectively official this October when Xi may be returned for a third term in breach of the longstanding term limits.

The only other person to have done so is Putin, and his return for a third term last decade coincided with a 50% fall in Russia’s GDP over the 2010s.

It’s unclear why anything different should be expected for China if it continues to apply Putinism by returning Xi rather than a new head of state.

The timing of Pelosi’s visit therefore is quite apt, because China’s elite needs more clarity about the choice that they face and the direction their country might follow.

Instead of buying into Russian propaganda, China could have and still can move towards reforming especially the judiciary, in particular where it concerns foreign businesses and individuals so that there is a right of redress in ordinary.

Otherwise foreign investment, which has made China what it is, will probably slowly dry up because the political risks would simply be far too great.

But everyone expects a Xi coronation so these exaggerated ‘flash points’ might be the new normal. With it, we might get a different new normal where China stagnates or even contracts in relative terms, with Europe in particular and also US seeing proper growth.

As China has banned bitcoin, their internal economic troubles shouldn’t reflect much on crypto, but enforcement might get more difficult the more confidence is shaken in their economy.

While for US stocks futures point to slightly down at 0.5%, but both America and Europe are growing, the latter at 4% for the second quarter.