China’s stock market has fallen into a bear market and the currency is tumbling on worries about tariffs and China’s efforts to rein in domestic debt.
SHANGHAI — Months of struggling with economic problems at home and bickering with President Trump over trade are starting to take their toll on China’s financial health.
China’s stock market has now fallen close to levels not seen since a crash shocked global investors three years ago. An elite Chinese think tank affiliated with the government warned this week that the chances of a financial panic had risen significantly, shaking markets even more.
Chinese officials are trying to help factories deal with American tariffs by weakening the value of the country’s currency. That makes Chinese goods more competitive abroad, but it also gives investors inside and outside China a reason to take their money out of the country. And it offers Mr. Trump an opportunity to criticize Beijing — in the past, he has railed against the country for weakening its currency.
The chances of a financial collapse that could shake the world are slim. The Chinese government has vast sums of money it can tap in the event of a crisis. And there are steep financial barriers to keep money from fleeing the country. While investors have ways around the barriers, they limit the possibility that such a flight could bring one of the world’s most important growth engines to a halt.
Nevertheless, China faces some increasingly serious economic challenges. It is trying to tackle its considerable debt problems without starving its economy of the money that keeps growth chugging along. The president’s tariffs so far have been quite small in the grand scheme of things, but they add to China’s troubles. The next wave of tariffs, set at 25 percent, threatens to cover at least a tenth of China’s exports to the United States, and more could follow.
China’s stock markets reflect the uncertainty. The Chinese stock market as of this week is down more than 20 percent from its January peak, making it a bear market. The country’s main stock index lost nearly 1 percent on Thursday.
“You don’t know what Trump is going to do next,” said Hong Hao, the chief market strategist in the international unit of the Bank of Communications, one of China’s biggest banks.
