As China’s stock market continues to reverberate after Monday’s 8.5 per cent fall, the flow-on effect can be felt across sectors in Melbourne.
The Shanghai Composite Index had one of its biggest drops in eight years on Monday which was quickly followed by major government intervention yesterday.
Apart from the immediate impact on the Australian dollar’s exchange rate, Chinese citizens living in cities around Australia are beginning to notice the drop in confidence back home.
Director of the China Studies Centre at the University of Sydney, Professor Kerry Brown, said the government’s intervention in the stock market yesterday has resulted in a major drop in confidence among Chinese citizens.
“The Chinese economy is obviously going through a challenging time,” Mr Brown said. “People inevitably start to get nervous when their government has to keep reassuring them.”
One area where this is being felt in Melbourne is with international students. China continues to be the largest single nation contributor to Australia’s international student population, according to the Australian Bureau of Statistics.
Fan Xu, a Chinese student at the University of Melbourne, has already felt the pressure from her parents who live in her hometown in southern China.
“They support me and even though it hasn’t directly impacted their financial situation yet, the company my parents both work for has already started cutting costs and jobs,” Ms Xu said.
Experts have estimated that roughly 7 per cent of China’s urban population actually own stocks, limiting the impact to some extent.
Ms Xu moved to Melbourne three years ago to begin her undergraduate studies in economics, and is beginning to constantly monitor the markets activity.
“I’m starting to get worried,” she said. “I see China as this big super power, as many people do, and to think the country might not be as strong as we thought is terrifying.”
With the China Australia Free Trade Agreement (ChAFTA) being finalised last month, Australia and China have never been more connected.
Mr Brown warns business ventures into China could expect a drop as companies begin to view Chinese partners with less stability.
“If we’re going to do business with China we need to do it with our eyes wide open.”
Many have turned attention to Melbourne’s property market, where Australia currently attracts more than one quarter of Chinese capital which flows into global real estate, according to Commercial Real Estate Services.
“The stock exchange has been an absolute riot the last year, rising hugely, and now they’re losing confidence” Mr Brown said. “If people start pulling out in panic, Australia will definitely go down with their markets.”
