China’s stock market rout has wiped more than $3 trillion from share valuations, generating terrifying headlines and fears over consumer confidence, but analysts say the impact on growth in the world’s second-largest economy could be limited.
The decline in overall market capitalization represents a huge sum by any standard, and is equivalent to more than a third of the country’s gross domestic product last year, AFP reported.
Over 99% of China’s more than 90 million stock investors are individuals, according to the China Securities Depository and Clearing Co.
Those who have lost money will have less to spend in a slowing economy that authorities are looking to rebalance away from infrastructure investment and toward consumer demand.
Since late last year, authorities have broadly encouraged people to invest in shares, and Jeremy Stevens, Beijing-based Asia economist at South Africa’s Standard Bank, said that with 52 million new stock accounts opened so far in 2015 alone, “the reach of potential harm has widened”.
The Chinese Passenger Car Association, for example, said the weeks-long market retreat was a factor behind a 3.2% year-on-year sales decline in June.
“The stock market turmoil has led more people to put off their plan to buy new cars,” it said, adding that according to dealers some customers who had put down deposits had become “unwilling” or “did not have the cash” to pay the balance.
