The US trade war and the shadow banking crackdown weighed heavy in the Chinese stock market in 2018, resulting in it losing $2.3 trillion in value. Although the China-US trade war took most of the spotlight in the press, the government campaign against leverage in the financial system played an important role in slowing the market demand and forcing some funds into liquidation. The China benchmark CSI 300 index will finish the year about 25 percent down from where is started in 2018, while the Japanese N225 fell by 14 percent.
Markets continue to suffer from the stress of the trade war, despite the recent talk of a possible new door opening up to trade talks. But since June 2018, the volatility seen in markets confirms the possibility of a hard landing due to trade and other negative factors that are influencing the Chinese stock market. Evidence suggests that a hard landing in the US and China will spell trouble for the Germans as well.
Liquidity in the Chinese market tightened up this year following a regulatory crackdown aimed at combating a long buildup in leverage in the financial system. This year the Chinese government did not deploy a significant state-backed effort to stabilize stocks as they did in 2015. This time, regulators are allowing mainly market forces to stabilizing the system, therefore the performance of the stock market was the worst of all major markets, losing $2.3 trillion in the year of 2018.