Xi flexing muscles AI image

Is genuine China stimulus finally coming?

There has been a slow pivot in Chinese policy ongoing for the past two months but the market appeared to be frustrated with piecemeal offerings rather than broader stimulus. Inflation is low in China but policymakers have been trying to deflate real estate and move to a consumption-led economy, rather than relying on investment.

That dynamic has capped commodity prices this year and led to a disappointing post-covid recovery in China.

However today's Politburo meeting may have signalled more of a change as state news agency Xinhua reported officials decided to China step up economic policy adjustments, focusing on expanding domestic demand, boosting confidence and preventing risks.

"Currently, China's economy is facing new difficulties and challenges, which mainly arise from insufficient domestic demand, difficulties in the operation of some enterprises, risks and hidden dangers in key areas, as well as a grim and complex external environment," Xinhua quoted the Politburo as saying, after a meeting chaired by President Xi Jinping.

Some assets that are getting help from Chinese stimulus comments include:

  • Brent crude +1.7%, and above the 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". There were reports in official media last week that the PBOC would cut the RRR in the short term.

The report was light on specifics but said the aim was to boost domestic demand and cited autos, electronics and household products along with tourism. There was also a mention of 'significant changes' in the property market, which is a hint at measures to strengthen the struggling real estate sector.