Asian markets declined significantly as pressure on the Chinese economy continued to mount. Investor sentiment was dominated by anticipation and anxiety, as they eagerly awaited the release of U.S. economic data that could influence the Federal Reserve’s stance on interest rates.
The Nikkei in Japan saw a slight drop of 0.1%, closing at 38,634.50 points. In China, the Shanghai Composite Index fell by 0.52% to 2,796.48 points, while the Hang Seng Index in Hong Kong similarly declined, settling at 17,601.00 points, a 0.51% decrease during the trading session.
This downward trend in the markets followed last Friday’s surprising U.S. spending data, which reduced the likelihood of a decisive half-point interest rate cut by the Federal Reserve. The upcoming U.S. ISM manufacturing index and jobs report on Friday are expected to be key factors influencing the Fed’s decision.
Amid these developments, concerns about the Chinese economy are growing, as it faces dual pressures from unfavorable weather conditions and weak domestic demand. According to Citigroup economists, there has been a noticeable deterioration in economic activity, despite expectations of a slight improvement in the consumer price index due to rising food prices. However, China’s goal of achieving “around 5%” growth may encounter significant challenges.
Simultaneously, tensions between China and Japan have escalated in recent days, following reports that Beijing is threatening severe economic repercussions if Japan tightens restrictions on the sale and maintenance of chip-making equipment to Chinese companies. This comes at a critical time, coinciding with U.S.-led efforts to limit China’s access to advanced technology, which could significantly impact the global semiconductor industry.
Major Japanese companies, such as Toyota Motor, have expressed concern over the potential consequences of these tensions, particularly regarding the availability of vital materials used in car manufacturing. In this context, the U.S. is pushing Japan to impose further restrictions on companies like Tokyo Electron, which play a crucial role in producing chip-making equipment, as part of its efforts to curb China’s technological advancement in this field. With China having imposed export restrictions on essential materials like gallium, germanium, and graphite last year, U.S. and Japanese officials are working together to ensure a stable supply of these critical minerals.
