American Depository Receipts (ADRs) of cross-listed Chinese firms stumbled earlier this week after mixed economic results in a report produced by the U.S. National Bureau of Statistics.
Some aspects of the Chinese government's report beat analyst expectations, such as a Gross Domestic Product (GDP) of 4.8%, beating the average estimate of 4.4%. Fixed asset investment rose to 9.3% compared to the estimate of 8.5%. Investment in manufacturing rose over 15%, with investment in infrastructure increasing by 8.5%.
Where the report begins to worry investors, however, is the slump in retail sales, which declined by 3.5% as opposed to an estimated 1.6% decrease. The Chinese property market is slowing down, too, with sales dropping 29% in March. Additionally, unemployment across major Chinese firms has risen by 6%, a more severe figure than even amid the height of the COVID-19 pandemic.
The Caixin Purchasing Managers Index, which measures service sector activity in Chinese companies, suffered a considerable drop earlier this month as well.
Already facing a sagging share price due to production issues, EV maker Nio
The latest round of economic woes for China and foreign investors tied to the Asian superpower stems from the latest COVID-19 surge in major cities and the government's "zero COVID" policy that has heavily restricted the movement of citizens. Zero COVID policies have already affected numerous Chinese and foreign firms, such as causing production stoppages at plants owned by Nio and Tesla
Investors should likely expect Chinese consumption to remain low in the short-term future. Already, oil prices have slid in sympathy with anticipated reductions in Chinese demand.
