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China’s Economic Slump and Your Portfolio.

China’s struggling economy could potentially be bad news for your portfolio due to consumer spending, factory production and long-term asset investments slowing down even more compared to last year. Even unemployment among China’s youth is on the rise. China’s economy is closely linked to that of the US, as they are co-dependent. As many funds and stocks use the US dollar as the base currency, it could affect stock prices.

What does this mean for your investments?

For the last two decades, China’s growing economy has been a major influencer on global economics, and with China’s economic growth slowing down, it could affect global economic growth as well. This is especially important as many major companies and stocks are linked to China as part of their manufacturing process, like Starbucks, which relies heavily on Chinese consumers, Tesla and even Nvidia.

To add fuel to the fire, China’s second-largest property group, Evergrande, has filed for bankruptcy protection with the US, to protect its US assets while it restructures, as foreign investors in Evergrande are set to lose money. Also, last week US President Joe Biden announced an executive order limiting US investments in advanced tech from China.

But there is an upside as China focuses on rebooting its economy. ‘My thoughts are that China is cleaning and strengthening its economy.’ Says Nigel Green, CEO deVere. ‘This temporary tech fall represents a typical summer buying opportunity for investors to acquire tech stock at lower prices.’

It is important that your portfolio stays diversified during economic turmoil to mitigate the risk of losses. A financial advisor can analyse your investments and ensure that you are suitably diversified.

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