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Is China A Rising Dragon Again?

When China’s stock market, the CSI 300, fell to multi-year lows in late January, regulators needed to step in. The government relaxed its lending rates for the housing market. Chinese banks also approved $17 billion in loans for 162 housing projects in 57 cities. In effect, the easing monetary policy and stimulus set the Shanghai Composite index back to 3,005.

The index rose for a rare eighth straight session for the week Ended Feb. 23, 2024.

PDD Stumbles

PDD Holdings (PDD), which owns the Temu app, slipped slightly on reports that some U.S. lawmakers are concerned about forced labor. If agencies like the Department of Homeland Security add Temu to the list of violators, it would disrupt PDD’s strong growth in U.S. markets.

PDD is a formidable competitor to Amazon’s (AMZN) e-commerce site. It sells very inexpensive goods worldwide. The products are low quality but are appealing to cash-strapped consumers. Temu’s success pressures Coupang (CPNG) in South Korea and Sea Ltd. (SE) in Southeast Asian countries.

Rising Dragon

China is far from re-emerging as the rising dragon. It lost momentum in 2016 when the U.S. and China trade war erupted. In 2020-22, the lockdown hurt China’s economy. It deterred foreign firms from relying on their “just in time” manufacturing model.

China needs to repair relations with neighboring countries. Until trade strengthens, China and stocks in the country will have limited upside.