China | What media sentiments tell us about China’s financial vulnerabilities?

Summary

The first half of 2022 is fraught with negative shocks to the Chinese economy. The default of Evergrande Group, mounting geopolitical risks concerns and the sweep of Omicron variant etc. not only brought strong headwinds to economic growth but also resulted in the deterioration of China’s financial vulnerabilities.

Key points

• Key points:
• CVSI index dropped sharply at the beginning of this year. Despite a lull of rebound, it currently hovers below the index historical average (which is represented by the level of 0).
• Although the indebtedness sub-index stabilized a bit towards the end-May, its level was still below that of Q1 2020 when the Covid-19 broke out in Wuhan.
• Comparatively, the sub-index of real estate showed certain stabilization recently and is close to its historical average.
• The sub-index of shadow banking activities has shown certain improvement since the start of the year, while it could deteriorate in the near future.
• The sub-index of FX had a deep drop during March-April, in line with a round of fast depreciation in the RMB exchange rate.

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