China’s Neighbours Shouldn’t Cheer On Its Slowdown

China’s economic troubles have so far been a boon to other Asian markets. But if the world’s second largest economy continues to turn sour, things could start to look uglier for them too.

Major Asian stock markets have been doing well in 2023. Japan’s Topix index has gained 24% this year while Taiwan’s Taiex index has risen 18% and Korea’s Kospi is up 15%. That is in contrast to Chinese stocks: the MSCI China index has dropped 6%, despite a strong start of the year.

There are some fundamental reasons why Asian stocks outside of China have gone up. Buybacks and dividends are rising in Japan, while Warren Buffett’s endorsement gave the market another push. The hope of an eventual rebound in the semiconductor industry has lifted stocks in Taiwan and South Korea. But these markets also benefited from foreign investors fleeing Chinese stocks: markets such as Japan and South Korea have seen foreign inflows in recent months. Some multinationals have also been migrating manufacturing out of China and into other Asian countries to diversify their supply chains.

However, Goldman Sachs has noted that correlations between China and other markets in the region have risen lately, indicating potential concerns of spillover.

China is the top trading partner of many countries in the region like Japan and South Korea, and weak demand from China could ripple through to its neighbours. South Korea’s exports to China, accounting for roughly 20% of its total, fell 25% year on year in the first eight months of this year.

And falling investment in China—especially in the real-estate sector—could weigh on commodity prices. So far prices of commodities such as iron ore have been resilient this year as demand from sectors like autos and infrastructure have softened the blows from property construction. But commodity-exporting nations such as Australia, Malaysia and Indonesia could suffer if Chinese investment remains weak.

The confidence crisis in China could also hurt companies selling to the country’s consumers. The number of Chinese tourists, in particular, is still way down from pre-Covid levels for many countries like Japan and Thailand.

As China is the economic juggernaut in the region, the country’s pain is unlikely to be its neighbours’ gain for long.

More Australians are living beyond their means in order to keep up appearances, new data has revealed.

A survey by financial comparison site, Finder, has shown 30 percent, or 6.3 million people, have felt pressured into purchasing to keep up with family or friends. The research, which involved surveying 1,062 Australians, also showed 15 percent of people have gone into debt as a result.

The most common sources of over spending people felt pressured into included splitting an expensive restaurant bill despite ordering less (14 percent), taking an expensive holiday (11 percent) and buying tickets to an event (10 percent). However, six percent of Australians had bought a nice car and five percent had bought a house in order to keep pace with others.

Tellingly, the wedding industry made an appearance on the list, with five percent of people pressured into over extending for a bucks or hens night. Three percent reported feeling pressured to pay for someone’s baby shower.

Sarah Megginson, personal finance expert at Finder said ‘comparisonitis’ was exacerbated by social media consumption.

“Never before have we had such an intimate and behind the scenes view into other people’s lives – but it’s important to remember it’s a highlight reel,” Ms Megginson.

“The millionaire next door might be drowning in debt to afford that apparent life of luxury.”

She counselled against falling into the trap of living beyond your means because others appear to have more.

“Getting into debt, ruining personal finances and compromising your values are all very real risks when it comes to trying to keep up with what others have,” she said. “Success isn’t defined by what you have or where you holiday. Focus on future wealth by paying your debt off and dedicating more money to investments and savings than to material possessions.”

China’s Neighbours Shouldn’t Cheer On Its Slowdown

Asian markets have been rallying even as China falters, but that may not last

As costs continue to mount, more Australians are feeling the weight of expectation to keep spending