China stocks slide, US stocks glide – will reform work to stem the tide?
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China's stock market has experienced massive losses, while the US stock market has reached record highs. Analysts believe that China needs to address systemic issues and loosen capital controls to change course and become a financial superpower. The "magnificent seven" tech giants in the US, including Nvidia, Tesla, Meta Platforms, Apple, Amazon, Microsoft, and Alphabet, have contributed significantly to the record highs in the US stock market. China's stock market has suffered from restrictive pandemic controls, regulatory tightening, and a bumpy post-Covid recovery, leading to a loss of US$3 trillion in capitalization over the past three years. Beijing has implemented measures to prevent a downturn, but analysts believe that a sustained rally requires improving economic fundamentals. The lack of confidence in China's stock market is compounded by broader economic and societal concerns. China's economy grew by 5.2% in 2023, but faces challenges such as debt, employment worries, and erratic business sentiment. President Xi Jinping has emphasized the need for China to become a financial superpower with a distinct system from Western models. Beijing has been addressing weaknesses in its financial system and aims to learn from the openness and transparency of US equity markets. Analysts believe that finance should support technological transformation in enterprises and that the market should play a more prominent role. China's goal of building itself into a global financial powerhouse is hindered by tight capital controls, preventing institutions and investors from participating in the global financial arena.
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