Good morning, and welcome to our live, rolling coverage of business, economics and financial markets.
Chinese stock markets hit their lowest level since December on Monday as investors took fright over tightening regulation. The tech sector has been under pressure in recent weeks, and now the Communist party government has turned its attention to the vast private education sector and property sectors.
For-profit tutoring in subjects on the school curriculum will be barred, ostensibly to reduce financial burdens on families and make having more children more attractive, as China seeks to arrest a fall in its population that has reportedly alarmed the country’s leadership. Foreign investment in private tutoring companies will also be heavily restricted.
Private tuition is widely used in China. Indeed, Reuters cited data from the Chinese Society of Education suggesting that more than 75% of students aged from around 6 to 18 in China attended after-school tutoring classes in 2016.
And in the tech sector shares in Tencent, the giant internet conglomerate, have fallen after it was ordered to forgo exclusive music licensing deals, a move that could reduce its dominance of streaming in China. The government has already sought to clip the wings of ride-hailing company Didi Chuxing.
CN Wire
(@Sino_Market)Tencent drops 6% below HK$500, the lowest since Sept 2020.#Tencent #Stockmarket $TCHEY pic.twitter.com/f6a3dbodvL
Meanwhile, the Chinese government has also said it will try to sort out irregularities in its property sector within three years. For years many economists have been warily eyeing the sector for possible overheating. The CSI 300 real estate index lost 6.2% on Monday, and developer Evergrande – whose massive debt burden is seen by some as a potential risk to financial stability – lost 5.7%, leaving it down by more than half this year.
The CSI 300 index, which tracks blue-chip companies on the Shanghai and Shenzhen stock exchanges, had dropped 3.4% at the time of writing. It was a 10-week low. Hong Kong’s Hang Seng index lost 3.5%.
Economists at Nomura warned that things could be difficult for the Chinese economy this year in general. They wrote (via Reuters):
We believe China’s economy, and specifically its financial system, will face significant risks in coming months due to the unprecedented tightening measures applied to the property sector.
Japanese stocks, however, performed better on Monday. On the first trading day of the Tokyo Olympics its broad Topix index gained 1.1% and the Nikkei 225 gained 1%.
The agenda
- 9am BST: Eurozone manufacturing purchasing managers’ index (PMI) (July; previous: 63.4; consensus: 62.6)
- 9:30am BST: UK manufacturing PMI (July; prev.: 63.9; cons.: 60.4)
- 2:45pm BST: US manufacturing PMI (July: prev.: 62.1; cons.: 63.1)