### Summary
🇩🇪 German Economy Minister, Robert Habeck, plans to tighten the process for reviewing foreign investments with a new law to enhance economic security and reduce reliance on China.
### Facts
- 📜 German Economy Minister Robert Habeck aims to enhance economic security by tightening the process for reviewing foreign investments.
- 🌍 Berlin urges companies to reduce their dependence on China and examines whether current regulations are sufficient for this goal.
- 🇩🇪 Germany's strong business ties with China have raised concerns about the country's commitment to the Western approach to China.
- 🔍 The new law would audit investments made through contractual agreements instead of acquiring voting shares.
- 🏭 The ministry is also considering checking the security significance of new factories built in Germany by foreign companies.
- 🤝 Security-critical research cooperation deals may also be scrutinized for potential risks.
- 🌐 The move reflects a broader Western push to reduce strategic dependence on China and de-risk supply chains.
Source: Reuters
Chinese authorities have introduced new measures to boost investor confidence in the stock market by reducing trading costs, relaxing rules on share buybacks, and considering extended trading hours and a cut in stamp duty, following recent declines in both the stock and bond markets. These declines have been influenced by China's deteriorating economic outlook, including deflation, weak consumer spending on manufactured goods, rising youth unemployment, and concerns over the property market.
Asian stocks, particularly Chinese markets, may find some relief after Wall Street's resilience in the face of rising bond yields, though economic data from China remains underwhelming and foreign investors continue to sell Chinese stocks.
Beijing needs to provide clarity on its economic plans and the national security crackdown in order to rebuild confidence in the future trajectory of China and address uncertainties, according to the head of a European business lobby in China.
The volume of investment guarantees provided by the German government to companies investing in China has significantly decreased this year, reflecting Germany's efforts to reduce reliance on the country and address security concerns related to advanced Chinese manufacturing.
Despite Chinese companies committing over a billion dollars to share buybacks, these efforts have failed to restore confidence in the struggling market, as foreign investors continue to sell off Chinese stocks due to concerns over the property market and other factors.
Global investors are skeptical of China's ability to stabilize its financial markets, with many predicting that economic pressures will cause the offshore exchange rate of the yuan to reach record lows.
China's economic slowdown is causing alarm worldwide, with countries experiencing a slump in trade, falling commodity prices, and a decrease in Chinese demand for goods and services, while global investors are pulling billions of dollars from China's stock markets and cutting their targets for Chinese equities.
China has announced measures to support the market, including reducing stamp duty on stock trading and approving the launch of retail funds, but the response from investors has been muted.
China has defended its business practices and claimed that most U.S. firms want to stay and that Beijing is working to ease market access for foreign companies, in response to concerns from American businesses and global investors about the difficulties and risks of doing business in China.
US companies are becoming increasingly hesitant to invest in China due to concerns over new anti-spying laws, competition from state-funded firms, and the country's economic challenges such as deflation and a property crisis.
Despite efforts by the U.S. and other countries to reduce reliance on Chinese supply chains, Chinese companies have successfully expanded their presence in key markets such as cutting-edge materials and electric vehicles, making it difficult for countries to ensure their economic security.
China's shadow banking industry, which includes lightly regulated trust firms, is facing financial distress due to the country's economic woes, raising concerns of a potential larger financial crisis that could spread globally. The fall of these trusts could have a domino effect and impact Western organizations that have loaned to shadow banks, affecting the broader economy and stock market. There may be a call for regulatory measures to rein in the unruly shadow banking sector.
Weak governance and poor disclosure practices in China's corporate sector are causing international money managers to become increasingly wary of investing in the country, potentially leading to limited access to financing and higher borrowing costs for Chinese companies in the future.
China's appeal to multinational corporations remains strong due to its robust domestic market and commitment to opening up its economy, leading to a shift in the quality of foreign investment inflow into the country, particularly in sectors such as trade in services and high-end manufacturing.
Despite the risks and challenges of doing business in China, many Western companies still see it as a long-term bet due to its economic potential, but they are increasingly cautious and aware of the hazards they face.
China's financial regulator has reduced the risk weighting for insurance companies' holdings of blue-chip shares and tech stocks, encouraging them to invest more in the country's stock market.
China's central bank will take measures to boost demand, support price rebound, and create a favorable monetary and financial environment to enhance economic vitality, according to an unnamed senior central bank official.
The Biden administration plans to increase scrutiny of foreign-owned companies' investment plans in the United States, with a focus on national security concerns and potential risks related to China.
The performance of Alibaba and JD.com stocks suggests that investors are uncertain about whether China's economy is improving despite positive Chinese data.
U.S. companies are losing confidence in China and some are limiting their investments due to tensions between the two countries and China's economic slowdown.
China should focus on structural reforms instead of relying on macroeconomic policies to revive its growth, as it has limited room for further monetary policy easing, according to a central bank adviser. The adviser suggests encouraging entrepreneurs and implementing demand-side and supply-side reforms to aid the economy. Recognizing the status of private businesses is also essential for revitalizing investor confidence.
Asian markets may be bolstered by Wall Street's performance, but concerns regarding the surging dollar, rising U.S. Treasury yields, and troubles in the Chinese property sector may dampen investor enthusiasm.
US companies' optimism about their business prospects in China is at a record low, with US-China tensions and negative effects on businesses being the biggest challenges, according to a survey by the US-China Business Council. Despite the low optimism, China remains a top-five priority market for 74% of companies surveyed.
China's efforts to reopen its economy and attract foreign investment after lifting its COVID-19 restrictions have been disappointing, with cross-border investment flows weakening, communication between the government and foreign investors strained, and business sentiment continuing to deteriorate.
China's President Xi Jinping emphasizes the need for reform and opening up the economy as foreign investors consider leaving, calling for a greater opening up of free-trade zones and a focus on playing by international trade rules. Despite these efforts, China's foreign direct investment has fallen and US businesses remain skeptical due to regulatory uncertainties and geopolitical risks.
China's central bank vows to provide stronger policy support for the economy and maintain a healthy property market, following the rebound of industrial profits in August.
India's recent economic gains are unlikely to surpass China as the world economy's main growth engine, according to HSBC Holdings Plc, as India currently has too few economic drivers and China's importance cannot be easily replaced; however, HSBC does expect India to make significant contributions to global demand for commodities, consumption, and capital goods.
Wall Street CEOs Jamie Dimon and David Solomon have warned investors to exercise caution due to economic and geopolitical risks, including the potential impact of fiscal and monetary stimulus waning, conflicts between Russia and Ukraine and Israel and Hamas, and potential economic slowdowns caused by higher interest rates.
JPMorgan predicts that India will become the world's third-largest economy by 2027 and reach a GDP of $7 trillion by 2030, with manufacturing and exports playing a significant role in its growth. The managing director also expresses optimism about China's economic trajectory and suggests potential opportunities in specific sectors. China is considering implementing a stimulus initiative and exploring the creation of a stock stabilization fund to boost investor confidence.
