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The markets have fallen out of love with China

Photo by Guang Niu/Getty Images

Only a few years ago it was strange to meet someone who wasn’t bullish about the Chinese economy. Monotonously the economy produced eye-watering growth rates each and every year, drawing investors in far and wide to marvel at the success story. It was only going to get stronger, and larger, eventually leading to the nation displacing the United States as the largest economy worldwide.

While that still appears likely, at least on the current trajectory, it’s clear that sentiment towards China is no longer bullish but outright bearish. Be it China’s property, stock or currency market, and as a consequence its financial sector, investors worldwide continue to fret.

Nothing demonstrates the stark change in investor mindset over the past three years or so than the latest quarterly global macro survey conducted by Barclays.

The bank asked 585 global investors, predominantly from North America and Europe who operate in stocks, credit and rates markets, a series of questions relating to the outlook for asset classes and the global economy in the period ahead.

While the surveys findings on what were the biggest risks to markets over the next 12 months were evenly spread, it was weak growth in emerging markets, led by China, that continued to outrank all others within the investment community.

The five charts below, supplied by Barclays, offer an indication as to just how pessimistic the markets have become towards China over recent years. It offers something for China bears, and contrarian investors, alike.

Here's what the survey found were the biggest risks for markets in the year ahead.

And what nation or region was most likely to undershoot on economic growth.

Most see the chance of a significant negative shock to China's economy over the next two years at around 10-25%. However, around 50% see the odds being greater than that level.

Perhaps swayed by the governments ability to hit growth targets seemingly at will, most still predict that Chinese growth will range between 6-6.5% over the next 12 months. Still, risks are clearly seen to the downside.

Whereas China was once the emerging market investment destination of choice, investors are now looking to the next global superpower - India - to power investment returns.

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