What's going on?

Data out on Thursday showed manufacturing activity in China shrank for the first time since the start of the pandemic, and it didn�t like the sound of that back then either.

What does this mean?

China was one of the few countries in the world to actually grow its economy last year, mostly by doing a good job of keeping its factories firing on all cylinders. But between widespread energy shortages and newly imposed emissions targets, those same factories have now been having to cut back on production, according to a monthly survey that asks managers how busy they�ve been. That doesn�t bode well for its economy as a whole, with industrial activity accounting for more than 30% of China�s economic output last year. Throw in China�s crackdown on its massive property sector, and investment banks have been rethinking their economic forecasts: both Goldman Sachs and Nomura lowered their growth projections this week from 8.2% to 7.8% and 7.7% respectively.

Why should I care?

For markets: Investors are bailing on China.
China�s various crackdowns have wiped billions of dollars off international investors� portfolios in the last few months, and things might be about to get worse (tweet this): Goldman Sachs reckons one-sixth of the value of the Chinese stock market � $3.2 trillion worth � still relates to companies at risk of regulation. No shock, then, that data out on Thursday showed 12% of professional investors are planning to slash their investments in Chinese assets.

The bigger picture: Nice emissions targets, bro.
China�s push for sustainability might already be leaving marks on its economy, but Europe still doesn�t think the world�s second-biggest economy � which accounts for around a third of global emissions � is going far enough. It�s said it wants the country to speed up its efforts to reach peak carbon dioxide emissions by 2030, as well as promise to stop using coal both at home and abroad.