Hong Kong stocks sink as Chinese economy fears investors

China's No. 2 leader, Li Qiang, traveled to Switzerland with a message to the giants of the business world gathered at the World Economic Forum.

“Choosing the Chinese market is not a risk, but an opportunity,” said Mr. Li, China's Prime Minister. Tell An audience in Davos on Tuesday.

But there is a different feeling about China's role in the stock market, and it is not so optimistic. Concerns about the Chinese economy have been evident for months in Hong Kong, where stocks fell 14 percent last year, the fourth consecutive annual decline.

The new year offered no respite either, and economic data released by China on Wednesday sparked another sell-off.

In Hong Kong, where many of China's largest companies trade, shares fell 3.7 percent on Wednesday. So far this year, the market has lost a tenth of its value. In Shanghai, China's financial capital, stocks fell 2.1 percent, extending this year's decline to nearly 5 percent.

Although China announced that its economy grew by 5.2% in 2023, a high rate by most standards, it is witnessing tremendous change. China's leaders are trying to move the country away from the real estate and construction sector, which have long been pillars of growth, while at the same time working to reduce reliance on borrowed money.

The expected boom in consumption after China reversed its “totally eliminate Covid” policy in late 2022 also did not materialize.

A shrinking population and an aging workforce are increasing headwinds. China also said on Wednesday that its population has shrunk by 2 million people and is aging rapidly, increasing pressure on its already weak health care system and underfunded state pensions.

While China's economy has shown some slight improvement recently, “it is clear that the recovery remains fragile,” economists at Capital Economics wrote in a report.

Real estate companies and consumer companies were among the hardest hit by the sell-off in Hong Kong, which for years has been a gateway for foreign investors wanting to invest their money in mainland China. Longfour Group, a Chinese real estate developer, fell 6.8 percent, while Meituan, a Chinese delivery service, fell 7 percent.

Stock prices in the United States have been unchanged this year so far, while stock prices in Japan have risen by more than 6 percent.

Many investors were looking to China to stimulate its economy with major stimulus as it has done in the past during economic stress, but policymakers said that was different this time.

Mr. Chiang repeated this hesitation in his speech to the World Economic Forum. He said: “We were keen to avoid significant stimulus, and did not seek to achieve growth in the short term at the expense of accumulating risks in the long term.”