US election results boost optimism in markets of several countries, including China and India

After a two-week stay in China, British writer James Crabtree identified significant discrepancies in the state of the country's economy. While impressed by achievements in artificial intelligence, electric vehicles, and drones, he also found that the economy is facing issues related to weak demand, declining investment, rising unemployment, and a protracted crisis in the real estate sector.

In his publication titled 'China: Through the K-hole,' Crabtree characterized China as a 'K-shaped economy,' where rapid technological growth coexists with deep economic difficulties. He noted that upon leaving Shenzhen, he was struck by the power of the technological ecosystem, which surpassed his previous expectations, but the internal state of the economy turned out to be much worse than he had assumed.

Crabtree, an invited research fellow at the European Council on Foreign Relations, highlighted the growing gap between China's technology sector and its overall economic situation. He reported that while GDP grew by 4.5% in the last quarter, there is a decline in investment, weakening demand, a serious drop in property prices, and a cessation of spending by private businesses.

The geopolitical analyst also pointed to reduced tax revenues, pressure on China's stock market, and restricted access to advanced computing technologies. In Crabtree's view, China's remaining growth depends on exports, which are facing tariffs from trading partners.

During his trip to Beijing, Crabtree met with economist Michael Petis, who discussed the possibility of a prolonged period of weak growth in China, similar to what Japan experienced after its asset bubble burst. Analyst Petis assessed China's economic prospects as a period of slowdown, stagnation, and slow recovery that could last a decade or more, given that the country is grappling with one of the largest debt burdens in history. He called this a positive scenario.

Crabtree questioned whether official unemployment figures reflect the reality of the labor market. He cited an example where official unemployment is just over 5%, which, in his words, raises doubts. Chinese economist David Daokui Li recently reported the actual unemployment rate at 10.2%. Petis believes even this figure remains high. Quoting a Financial Times report, he mentioned that 53 million Chinese workers are employed in food delivery and ride-hailing, and about 200 million people work in the large gig economy.

The author suggested that China is using the informal economy as a kind of temporary buffer against unemployment amid the economic slowdown. His comments mentioned employment forecasts and alternative unemployment data that were not separately verified in the publication.

Crabtree noted that Chinese businesses are facing excessive domestic competition, especially in the electric vehicle sector. He recounted that during his visit, he often heard entrepreneurs say that the struggle in China resembles a civil war. Over a hundred EV brands are actively competing by lowering prices, leading to a significant reduction in margins for most companies. In Crabtree's opinion, such domestic competition forces Chinese firms to expand abroad in search of profit.

Furthermore, Crabtree drew attention to China preparing new export control regulations due to increased competition with the US. He stated that China is beginning to restrict the export of technologies, including powerful open-weight AI models, as well as drones and tunneling equipment. Beijing is creating systems similar to those in Washington to limit access to strategic technologies.

Ultimately, Crabtree concluded that China maintains technological competitiveness and strengthens its international standing despite structural problems in its domestic economy. He noted that Xi feels confident on the world stage, for instance, meeting with representatives from Washington in 2025. Although China's technological superiority is growing, the country feels economic weakness, which, in his opinion, explains Beijing's desire to maintain stable relations with the US.

Following the results of the midterm elections in the US, increased enthusiasm is observed on stock exchanges, and American markets are showing signs of significant growth. Similar growth is also noted in Asian markets. However, in India, this growth is driven not only by the results of the US elections but also by falling crude oil prices and expectations of a reduction in Long-Term Capital Gains (LTCG) tax.

During the 2026 US elections, Donald Trump's Republican Party suffered a serious defeat. The Democratic Party gained a majority in both chambers of the American parliament—the Senate and the House of Representatives. This is interpreted as an expression of voter dissatisfaction with the Trump administration. Previously, Democrats led in the House of Representatives with 224 out of 435 seats and in the Senate with 54 seats.

These results triggered a rise in the American market. The Dow Futures index shows a remarkable increase, rising by 770 points or 1.49 percent to 52,557. It should be noted that before the results were announced, this index fell by one percent but then recovered by approximately two percent from its low point.

Significant growth was also recorded in the Chinese market, where the index rose by 2.16 percent to 3,686.17, and the Hang Seng index saw a growth of 1.67 percent. Furthermore, the Kospi showed a growth of 0.62 percent, and the UK market grew by 0.30 percent.

The Indian market also demonstrated steady growth in the main indices Sensex and Nifty. The reason for this was the decrease in crude oil prices by about one percent and growing expectations of LTCG reduction. Nifty increased by 100 points, while Sensex grew by more than 350 points.

The results of the US midterm elections indicated an important shift in the future. Analysis of data from the past 11 periods since 1982 shows that in eight cases, the American benchmark index S&P 500 showed an average positive return of 10 percent over the following three months. ICICI Direct reported that in India, the stock index showed an average positive return of 12 percent in six cases since 1982.

Tanay Dalal, Senior Vice President of Economic Research at Axis Bank, noted that the Democrats' victory in the US midterm elections appears more convincing than many experts expected, and some traditionally strong Republican bastions are under pressure. He suggested that one possible consequence could be the adoption of a more divided approach to artificial intelligence (AI) regulation. For India, this could be a positive development, as a less unified regulatory environment can support demand for export business services and outsourced technology.