A recent stock market rally in China has lost momentum after an eagerly awaited announcement on measures to revive the struggling economy fell short of investor expectations. Following the Golden Week holiday, shares initially surged by more than 10%, but quickly declined after a news conference by China’s economic planners offered few new details on the government’s strategy to stimulate growth.
During the volatile trading session, the Shanghai Composite Index rose by about 3% in early afternoon trading, while Hong Kong’s Hang Seng Index dropped by more than 7%. Investors had been hoping for more clarity on how the government would bolster economic growth, but were left disappointed by the lack of specifics.
Zheng Shanjie, chairman of China’s National Development and Reform Commission, expressed confidence in achieving the country’s annual economic and social goals. However, he acknowledged the growing pressure on China’s economy, and announced that 200 billion yuan ($28 billion) would be allocated for spending and investment projects by the year’s end.
Alicia Garcia-Herrero, chief economist for the Asia Pacific region at Natixis, noted that the market had been anticipating more robust fiscal stimulus. She commented, “The market is reacting to the absence of a real fiscal stimulus. It would have been better not to hold a press conference without announcing anything new.”
The Chinese government has been attempting to boost confidence in the economy as concerns grow that it might miss its 5% annual growth target. In recent months, officials have introduced several measures, including support for the ailing property sector, assistance for the stock market, cash handouts for low-income citizens, and increased government spending.
Despite these efforts, some economists have expressed doubts about whether these policies will be sufficient to address the country’s deep-rooted economic challenges. They argue that more comprehensive reforms may be needed to put China on a path to sustainable growth, as it continues to grapple with a property market slump, deflationary pressures, and other obstacles.
