The bulls charging through Shanghai are beginning to look over their shoulders.
The bulls charging through Shanghai are beginning to look over their shoulders.
Gaining on them is economic reality that has many wondering if the more than 30% surge in equities from a September low is overdone. The problem is an underlying economy facing intensifying headwinds. And one failing to keep pace with the sudden surge in investor optimism toward China.
This stock rally follows an extraordinary barrage of moves to cut interest rates, slash mortgage rates, relax rules for homebuyers in major cities and lower the amount of cash banks must keep in reserve.
Chinese leader Xi Jinping is hinting at bigger steps to come to boost national growth.
These maneuvers changed the subject from China’s deflation-generating property crisis, high youth unemployment and weak consumer demand.
Not for long, though, as Chinese data suggest more trouble ahead. In August, industrial industry profits plunged 17.8% from a year earlier, the sharpest contraction so far in 2024. Other data on retail sales and fixed asset investment add to worries Asia’s biggest economy is slowing anew.
So much so that some economists think Xi’s Communist Party should issue about 10 trillion yuan ($1.4 trillion) in special debt to lift confidence via infrastructure projects. Count Jia Kang, head of private think tank China Academy of New Supply-Side Economics, among them.
“As these projects get underway, they will create jobs, increase income for citizens, and unlock consumption potential,” says Jia, the former head of a research institute linked to the Ministry of Finance, told Chinese publication The Paper.
