While investors watch U.S. stock markets lead global exchanges higher, they are overlooking China’s Shanghai Composite Index falling. Last Friday, China’s currency fell to lows not seen in four months. The government and state-owned banks had managed to prop the CSI 300 index before the Chinese New Year. To prevent its currency from falling further, banks stepped in to support prices.
The exodus of Western firms, as measured by foreign direct investment collapsing last year, is hurting China’s economy. Weak domestic demand is starting to harm Apple (AAPL). CEO Tim Cook plans to visit China. He is reportedly set to reaffirm the company’s dedication to its supply chain in the country. So long as Apple customers did not care about where it makes devices, this visit should reaffirm Apple’s low-cost production in China.
Tesla (TSLA) cut its output in China, according to Bloomberg News. Workers will have a five-day-a-week schedule, down from 6.5 days. Chinese consumers will likely continue buying fewer Tesla vehicles. Home prices are falling rapidly. Since people have most of their savings in them, the asset decline would result in spending cuts.
Expect consumers to shy away from eating at McDonald’s (MCD) and Starbucks (SBUX), too. They will visit local restaurants that charge significantly less.
