The United States and China, the world’s two economic heavyweights, have underwhelmed in 2023. America is thriving while China is struggling. The next turn of events could be even more stunning and have far-reaching consequences for the UK.
Experts anticipated at the beginning of the year that the Chinese stock market would soar when Beijing reversed its controversial Zero Covid policy, while Wall Street would continue its downward spiral following a difficult 2022 when tech stocks fell.
Although the first quarter was promising, the Chinese dragon has since lost steam, and the country’s top property developers appear to be on the verge of collapse.
While tech companies have struggled, Wall Street has soared as investors rush to buy them again in anticipation of the AI revolution.
In an effort to slow the economy and reduce inflation, the US Federal Reserve has frequently raised interest rates.
Nvidia, a renowned chipmaker, has seen its stock price increase by 230% this year. Apple, Amazon, Meta (owner of Facebook), Alphabet (owner of Google), Microsoft, and Tesla (all tech titans) have also been doing well recently.
Still, the United States appears to be drifting aimlessly as investors worry about whether the country will experience a hard or soft economic landing.
The last thing we need is for there to be tension between the world’s two economic superpowers and the United Kingdom will be caught in the crossfire.
China was expected to have its year in 2023. Covid’s economy was predicted to recover quickly after protests led to the lifting of stringent lockdowns. Unemployment among young people officially reached 21.3%, risking societal upheaval. Almost definitely, the true number is substantially larger. The Chinese stock market also experienced a 20% decline in 2018, like the US market did, but unlike the US market, it has yet to recover.
As a result of the developer Evergrande Group declaring bankruptcy with debts of more than $300 billion (£235 billion), the Chinese real estate market is on the verge of catastrophe, and things might get very ugly very quickly. This has the potential to expand to country’s £2.3 trillion shadow banking sector, which is almost the size of the whole British economy.
The United States’ retaliatory tariffs and import bans are hurting China’s economy and making it more difficult for President Xi Jinping to project influence abroad. The twist comes now. The Chinese economy isn’t the only one on the verge of collapse, though. America is as well.
It appears like Democratic candidate Joe Biden and Republican candidate Donald Trump will square off in the upcoming presidential election. While Trump may be campaigning from behind bars, Biden is experiencing cognitive impairment.
According to Victoria Scholar, head of investment at Interactive Investor, hopes of reducing inflation are dwindling. Increasing interest rates by the Federal Reserve is still a distinct possibility.
The United States has been strengthened by the country’s free-market concept and huge pools of cash, according to Russ Mould, investment director at AJ Bell.
More than a trillion dollars in stimulus funding is being invested in environmentally friendly infrastructure according to Biden’s Inflation Reduction Act (IRA).
The annual interest on the United States government’s $32 trillion debt is $1 trillion.
In July, the United States’ credit rating was unexpectedly lowered from AAA to AA+. “As the shock downgrade of America’s credit rating to AA+ from AAA in July makes clear, this is not sustainable,” Mould added.
However, US officials are still in denial about the downgrade. The debt is an issue that neither the Democrats nor the Republicans seem interested in addressing. They prefer to place the blame on one another.
At least Chancellor Hunt is making an effort to rein on spending. The US debt mountain will continue to rise until action is taken.
About two-thirds of the total value of the global stock market is held in the country’s stock exchanges. Our retirement savings and 401(k)s will travel in the same direction as Wall Street.
If the world’s two economic giants were to collapse, the United Kingdom would be destroyed. Simply put, we lack the necessary influence.