The Covid-19 pandemic officially started in China. The Wuhan province of the nation is the originating place of the virus. Initially, China did not take enough steps. But the government took quick and strong steps once it became clear that the virus could become a crisis. They imposed lockdowns in many parts of the country. The virus has spread quickly to the rest of the world, with over 4 million cases globally. But China has been able to keep the number of cases low.
Chinese Markets Faring Better
The pandemic is having a big effect on the economies of affected countries. Analysts are expecting countries like the US and the UK to take a few years to properly recover from the economic impact of the coming recession. But since China was able to curb the spread of the virus very effectively, it has not taken a massive hit to its markets compared to other countries.
In March, the stock market in the US fell to three-year lows. The trend continued into April. While the stocks are recovering now, it is still a large hit to the US financial markets. The Chinese markets, however, have been performing better. The Shanghai composite has only fallen 5.2% for the year so far. The S&P 500, on the other hand, has fallen by 11.1% this year as of 12 May 2020.
Global Investments Shift To China
Investors across the globe are looking to protect their investments right now. Recent reports show that they are looking at China as a destination of investment. International funds have now moved nearly a quarter of their asset under management to Chinese stocks. This represents an increase of 20% from last year. These funds have over $2 Trillion in assets under management. It is evident that investors view China as a safer destination compared to other countries right now.
US-China Relations Likely To Worsen
The relations between the United States and China have been fragile since the pandemic started. Donald Trump’s repeated insistence to blame the pandemic solely on China has caused China to react negatively. There is pressure on the US government to reduce investment from America in Chinese companies. US investors are also wary of Chinese stocks since the Luckin Coffee scam. Thus, any move by the US to limit investment in Chinese companies is likely to worsen the relations between the two countries.