China’s top leaders have announced a ‘moderately loose’ monetary policy and a ‘more proactive’ fiscal policy, signaling a more aggressive approach to stimulus in 2023. The move has boosted Chinese stocks, with the Hang Seng Index rising 3% and companies like Alibaba and JD.com jumping at least 9%. Analysts expect more volatility in the near term but see this as a positive sign that more relief is on the way.
The announcement comes as China prepares for a possible trade war with the US and grapples with a sluggish economy. President-elect Donald Trump has pledged to impose blanket tariffs of at least 10% on all trading partners, including a 60% tariff on Chinese imports. This move has sparked concerns over the impact on global trade.
Despite these challenges, China’s leaders are committed to enacting further support to reach its economic goals, which include an annual growth target of “around 5%”. The government will reportedly meet this week to discuss those growth targets and economic goals.
Analysts are optimistic about the potential for fiscal and monetary stimulus to stabilize growth. Goldman Sachs chief China economist Hui Shan notes that policy implementation remains key for effectiveness, with a focus on consumption, high-tech manufacturing, and risk containment rather than traditional infrastructure and property investment.
While volatility is expected in the near term, long-term investors see benefits from the regulatory onslaught on tech companies and the shift towards fiscal and monetary stimulus. Beijing’s move signals a more aggressive approach to stimulus, which may help course-correct China’s struggling economy.
Source: https://finance.yahoo.com/news/chinas-big-monetary-policy-shift-spurred-a-stock-surge-but-a-lot-of-volatility-still-looms-195542488.html