In a November 2018 speech to workers at a state-owned enterprise, President Xi Jinping mentioned that current events were forcing China to “travel the road of self-reliance.” Over the past 5 years, import growth has been notably weaker than export growth. To investigate this trend further, we use a 5-years rolling-window to compute the correlation between GDP, imports, and exports growth. The correlation between GDP growth and import growth has been systematically lower than the correlation with export growth for about a decade now. The reduced synchronization between GDP and imports could be an early sign of increasing self-reliance at work. While decreasing its reliance on imports, China has simultaneously scaled up exports in sectors like automotives, and exports have become more closely linked to the overall GDP growth. In a sense, China is decreasing its reliance on imported inputs, but continues to maintain its reliance on foreign demand. All told, a delinking of global production processes and consumption from China is not in sight.
- Date Posted:
- February 6, 2024
In the US exchange-traded fund market, the main fund buying Indian stocks received record inflows in the final quarter of 2023, while the four largest China funds combined saw outflows of almost $800 million. Active bond funds have put 50 cents to work in India for every dollar they pulled from China since 2022, according to EPFR data. In mid-January, India briefly overtook Hong Kong to become the world’s fourth-largest equity market. Morgan Stanley predicts India’s stock market will become the third-largest by 2030. Its weight in the MSCI Inc.’s benchmark for developing-market equities is at an all-time high of 18%, even as China’s share has shrunk to its lowest on record at 24.8%. The euphoria has made Indian equities among the most expensive in the world. The gauge trades at more than 20 times future earnings, 27% more expensive than the average for the 2010 to 2020 period.