Is real Chinese stimulus finally coming?

There has been a slow turnaround in China’s policy over the past two months, but the market appears to be frustrated by piecemeal offers rather than broader stimulus. Inflation is low in China, but politicians have been trying to deflate real estate and move to a consumption-driven economy rather than relying on investment.

This momentum has constrained commodity prices this year and led to a disappointing post-Covid recovery in China.

However, today’s Politburo meeting may have signaled more of a change, as state news agency Xinhua reported that Chinese officials had decided to step up economic policy adjustments with a focus on expanding domestic demand, boosting confidence and preventing risks.

“China’s economy is currently facing new difficulties and challenges, mainly arising from insufficient domestic demand, difficulties in the operation of some enterprises, risks and hidden dangers in key areas, as well as a gloomy and complex external environment,” Xinhua quoted the Politburo as saying after a meeting chaired by President Xi Jinping.

Some assets getting help from China’s stimulus comments include:

  • Brent crude +1.7% and above 200-dma
  • copper +0.9%
  • MCHI China ETF +2.3%
  • KWEB China tech ETF +4.4%

The report says China will implement macro adjustments “in a precise and forceful manner.” Last week there were reports in the official media that the PBOC will cut the RRR in the short term.

The report was light on specifics, but said the goal was to boost domestic demand, citing autos, electronics and household products, along with tourism. There was also mention of “significant changes” in the property market, hinting at measures to boost the struggling property sector.

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