Commentary: China’s Stimulus Has Been Great for Stocks, but the Benefits for the Real Economy Are Less Certain
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The Chinese mainland’s benchmark stock index notched its largest weekly gain since December 2008 in the week through Sept. 27, rising neatly 12.8% over the five days.
The stock market rally was primarily driven by the announcement of stronger-than-expected monetary easing measures aimed at restoring market confidence and allaying concerns about China’s medium- to long-term growth prospects.
The measures, announced Sept. 24, included a planned cut in the reserve requirement ratio, lowering rates on existing home mortgages and setting up a 500 billion yuan ($71 billion) swap program to fund share purchases by securities firms. Then, on Sept. 26, China’s top leaders convened an economy-focused Politburo meeting.
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- The Chinese mainland's stock index saw its largest weekly gain since 2008, rising 12.8% by Sept. 27, 2023, fueled by unexpected monetary easing measures.
- Measures announced on Sept. 24 included reserve requirement cuts, lower mortgage rates, and a 500 billion yuan swap program for securities firms.
- While the measures uplift market sentiment, fiscal policies are critical for real economic growth; potential expansions in government bonds and spending were discussed.
- Sept. 21, 2024：
- Liu Shijin mentioned the idea of launching a two-year, 10 trillion yuan fiscal stimulus package during an economic forum organized by Renmin University of China.
- Sept. 24, 2024：
- Announcement of stronger-than-expected monetary easing measures, including a planned cut in the reserve requirement ratio, lowering rates on existing home mortgages, and setting up a 500 billion yuan swap program. People's Bank of China Governor Pan Gongsheng signaled openness to launching additional swap programs at a press conference.
- Sept. 26, 2024：
- China’s top leaders convened an economy-focused Politburo meeting to discuss the need for monetary and fiscal easing to revitalize the property market and shore up capital market confidence.
- By Sept. 27, 2024：
- The Chinese mainland’s benchmark stock index notched its largest weekly gain since December 2008, rising nearly 12.8% over five days.
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