(Bloomberg) — US and European businesses are reconsidering their investments in China after the lockdown in Shanghai and restrictions in other cities caused major disruption to their operations.
The American and European Union chambers of commerce in separate briefings said their members are rethinking their supply chains and whether to expand investment in the face of China’s zero tolerance approach to combating Covid-19.
“The Covid lockdowns this year and the restrictions over the past two years are going to mean that three, four, five years from now, we will most likely see investment decline,” Michael Hart, president of the American Chamber of Commerce in China, said Tuesday in Beijing.
While this doesn’t mean an immediate shift outside of China, Hart said that many firms that source from China are asking where else they can get supplies, and whether they should be building or sourcing from somewhere else.
The outlook is shared by European companies. Many members of the European Union Chamber of Commerce in China are putting investment plans on pause and starting to consider whether to leave the country, the business group’s representatives said at a briefing Monday. Uncertainties about a potential next wave of outbreaks are taking a heavy toll on business confidence, they said.
“Uncertainty is really the keyword, because there’s no view, no outlook about how long this could last, and what will be next after Shanghai,” said Massimo Bagnasco, vice president of the European chamber.
Read More: China Vows to Ease Supply Chain Woes in Foreign Chamber Meeting
Profits of foreign firms in China are falling, and companies have become increasingly vocal about the impact on their businesses from Covid lockdowns and restrictions. Earlier this month, more than half of US firms said they were reducing or delaying investment plans and expected lower revenue due to the economic fallout from extended lockdowns, which have clogged the world’s biggest port, closed highways and shuttered factories and businesses.
And last week, respondents to a survey by the German Chamber of Commerce in China reported that nearly 30% of their foreign employees had plans to leave China because of Covid. The chamber surveyed 460 companies.
The restrictions that began in March in Shanghai and elsewhere come on top of existing travel controls, which have made it hard for employees of foreign firms to travel to China or visit headquarters overseas.
The travel restrictions have left AmCham “very concerned” about US and other foreign investment into China, Hart said at a press conference to launch the chamber’s 2022 White Paper.
China usually ranks among the top three destinations for investment among AmCham’s member companies, but “it is falling in preference,” Hart said, adding that if people can’t travel to the country, it will “decline as an investment destination.”
European businesses continue to face challenges including lost production days, labor shortages and supply chain and logistics disruptions due to lockdown measures. The pressure to leave China will rise significantly if the obstacles don’t improve by the end of the year, said Joerg Wuttke, president of the chamber.
The economy is also unlikely to rebound this time around as sharply as it did in 2020 because of ongoing headwinds from the crackdown on the technology sector, a persistent property market slump, and capital flowing out of China as the China-US interest rate differential diminishes, according to Wuttke.
Read more: China’s Covid Exit Hinges on Seniors Who Don’t Want Vaccines
Wuttke urged China to accelerate its vaccination efforts, as the vaccine uptake among those older than 65 has slowed in recent months.
“You cannot hold an economy hostage by 150-to-160 million people that are insufficiently vaccinated,” he said. “This has to change, it can’t go on forever.”
(Updates with details about a survey by the German chamber of commerce in paragraph eight.)
TORONTO – Canada’s main stock index was down more than 200 points in late-morning trading, weighed down by losses in the technology, base metal and energy sectors, while U.S. stock markets also fell.
The S&P/TSX composite index was down 239.24 points at 22,749.04.
In New York, the Dow Jones industrial average was down 312.36 points at 40,443.39. The S&P 500 index was down 80.94 points at 5,422.47, while the Nasdaq composite was down 380.17 points at 16,747.49.
The Canadian dollar traded for 73.80 cents US compared with 74.00 cents US on Thursday.
The October crude oil contract was down US$1.07 at US$68.08 per barrel and the October natural gas contract was up less than a penny at US$2.26 per mmBTU.
The December gold contract was down US$2.10 at US$2,541.00 an ounce and the December copper contract was down four cents at US$4.10 a pound.
This report by The Canadian Press was first published Sept. 6, 2024.
TORONTO – Canada’s main stock index was up more than 150 points in late-morning trading, helped by strength in technology, financial and energy stocks, while U.S. stock markets also pushed higher.
The S&P/TSX composite index was up 171.41 points at 23,298.39.
In New York, the Dow Jones industrial average was up 278.37 points at 41,369.79. The S&P 500 index was up 38.17 points at 5,630.35, while the Nasdaq composite was up 177.15 points at 17,733.18.
The Canadian dollar traded for 74.19 cents US compared with 74.23 cents US on Wednesday.
The October crude oil contract was up US$1.75 at US$76.27 per barrel and the October natural gas contract was up less than a penny at US$2.10 per mmBTU.
The December gold contract was up US$18.70 at US$2,556.50 an ounce and the December copper contract was down less than a penny at US$4.22 a pound.
This report by The Canadian Press was first published Aug. 29, 2024.
The crypto market has recently experienced a significant downturn, mirroring broader risk asset sell-offs. Over the past week, Bitcoin’s price dropped by 24%, reaching $53,000, while Ethereum plummeted nearly a third to $2,340. Major altcoins also suffered, with Cardano down 27.7%, Solana 36.2%, Dogecoin 34.6%, XRP 23.1%, Shiba Inu 30.1%, and BNB 25.7%.
The severe downturn in the crypto market appears to be part of a broader flight to safety, triggered by disappointing economic data. A worse-than-expected unemployment report on Friday marked the beginning of a technical recession, as defined by the Sahm Rule. This rule identifies a recession when the three-month average unemployment rate rises by at least half a percentage point from its lowest point in the past year.
Friday’s figures met this threshold, signaling an abrupt economic downshift. Consequently, investors sought safer assets, leading to declines in major stock indices: the S&P 500 dropped 2%, the Nasdaq 2.5%, and the Dow 1.5%. This trend continued into Monday with further sell-offs overseas.
The crypto market’s rapid decline raises questions about its role as either a speculative asset or a hedge against inflation and recession. Despite hopes that crypto could act as a risk hedge, the recent crash suggests it remains a speculative investment.
Since the downturn, the crypto market has seen its largest three-day sell-off in nearly a year, losing over $500 billion in market value. According to CoinGlass data, this bloodbath wiped out more than $1 billion in leveraged positions within the last 24 hours, including $365 million in Bitcoin and $348 million in Ether.
Khushboo Khullar of Lightning Ventures, speaking to Bloomberg, argued that the crypto sell-off is part of a broader liquidity panic as traders rush to cover margin calls. Khullar views this as a temporary sell-off, presenting a potential buying opportunity.
Josh Gilbert, an eToro market analyst, supports Khullar’s perspective, suggesting that the expected Federal Reserve rate cuts could benefit crypto assets. “Crypto assets have sold off, but many investors will see an opportunity. We see Federal Reserve rate cuts, which are now likely to come sharper than expected, as hugely positive for crypto assets,” Gilbert told Coindesk.
Despite the recent volatility, crypto continues to make strides toward mainstream acceptance. Notably, Morgan Stanley will allow its advisors to offer Bitcoin ETFs starting Wednesday. This follows more than half a year after the introduction of the first Bitcoin ETF. The investment bank will enable over 15,000 of its financial advisors to sell BlackRock’s IBIT and Fidelity’s FBTC. This move is seen as a significant step toward the “mainstreamization” of crypto, given the lengthy regulatory and company processes in major investment banks.
The recent crypto market downturn highlights its volatility and the broader economic concerns affecting all risk assets. While some analysts see the current situation as a temporary sell-off and a buying opportunity, others caution against the speculative nature of crypto. As the market evolves, its role as a mainstream alternative asset continues to grow, marked by increasing institutional acceptance and new investment opportunities.
