The Hang Seng Index rose almost 2% today and is already in positive territory this year. In contrast, the Nikkei 225 index is up over 18% this year - see Figure 1.
The situation from 2019 looks even more interesting. Figure 2 shows the returns on the same indices since December 31, 2019.
Recently, there has been a lot of talk about the scenario that China will face a "lost decade" - just like it happened in Japan after the bubble burst in 1989. In this context, one may wonder why the Japanese yen has weakened against the dollar by 40% since 2019, and the Chinese renminbi by only 4%. Figure 3 and 4.
Will we see a (larger) devaluation of the Chinese currency? This is one of the ways to "regain competitiveness". Additionally, we would have Chinese deflation exported to the rest of the world…
Real estate prices have also looked much better in Japan than in China in recent years - see Figure 5.
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