China Stocks Rally as Xi Jinping Promises Stimulus Measures

China has recently shown its intention to implement extensive stimulus policies, sparking renewed hope in the country’s US$10 trillion stock market, which was beginning to show signs of a slowdown in its recovery.

After a Politburo meeting led by President Xi Jinping, there is growing speculation that the Chinese government will introduce more interest rate cuts in the coming year, raise its borrowing limit, and take additional measures to support the struggling property sector.

The strong message from policymakers resonated throughout Chinese financial markets, with stocks and bonds experiencing an upswing, while the yuan also gained strength, momentarily stopping its decline against the US dollar.

“Policymakers have made a significant change in their approach to reviving the economy and supporting the capital markets,” remarked Fang Yi, a strategist at Guotai Junan Securities in Shanghai. “The Politburo meeting represented a historic shift in policy setting, inspiring enhanced expectations about future measures and boosting investors’ confidence regarding the policy landscape.”

The recently held Politburo meeting, attended by Xi and other senior members of the Communist Party, is expected to pave the way for the upcoming Central Economic Work Conference (CEWC), which will outline pivotal policies for the next year. Investors are eagerly awaiting the CEWC for further insights on policy direction, especially after the government had previously not fully met its commitments regarding fiscal stimulus. The CEWC is scheduled to commence on Wednesday and conclude on Thursday.

The language used during the Politburo meeting is considered the strongest seen in years, amidst persistent deflationary concerns affecting the world’s second-largest economy and rising geopolitical tensions following Donald Trump’s re-election. China indicated it would pursue "unconventional" countercyclical measures and shift its monetary policy stance from "prudent" to "moderately loose," a phrase not utilized at high-level meetings since the aftermath of the 2008 global financial crisis.

China, stocks, stimulus