China's economic model is faltering – does it have the political will to fix it?

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The long days of summer are proving to be rather too long for the government in Beijing. In an attempt to stabilize the faltering real estate market, the authorities announced earlier this week a modest decline in interest rates that was underwhelming in scale and intent.

Article originally published by The Guardian. Hargreaves Lansdown is not responsible for its content or accuracy and may not share the author's views. News and research are not personal recommendations to deal. All investments can fall in value so you could get back less than you invest.

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23 Aug 2023

Those who recall the bad old days in which the west was buffeted by successive crises such as those involving Northern Rock, Bear Stearns and Lehman Brothers will recognise the futility of lower interest rates in stemming systemic problems in real estate and finance when the problem has nothing to do with interest rates being too high. And so it is in contemporary China, where the government is battling to stabilise an unstable economy.

It is clear that China’s economy is flailing. The yuan exchange rate is under pressure, and the authorities may be hard pushed to prevent people and firms trying to get money out of China despite tough regulations on the outflow of capital. Stock prices, which, to be fair, are only weakly associated with the economy, are at their lowest level