On 24 September, the Chinese central bank, the People’s Bank of China (PBOC) announced its sweeping economic stimulus to boost its economy. The PBOC Pan Gongsheng announced the bank’s plans to cut the reserve requirement ratios (RRR) by half a percentage point to free up about 1 trillion RMB (142.22 billion USD) for banks to lend. Meanwhile, measures to buoy the property market included reducing interest rates for existing mortgages and lowering the minimal required down payment on homes to 15%.
The measures come as China faces pressure from deflation as well as missing the 5% growth target. On Weibo, China’s Twitter-like platform, topics surrounding the announcement made it to the Hot Search list in batches. The topic “lower interest rates of existing mortgages” (#降低存量房贷利率#) shot to number 1 on the list with over 100 million views. Indeed, the move is the most watched as it would benefit over 50 million families, roughly 150 million people. Although some pundits find the raft of measures lacks direct stimulation towards the consumer-facing side of the “real economy”, others expect further stimulus in the near future to follow, including a potential fiscal package.
Upon the announcement, the stocks in Asia, especially Asian markets and the “China Concepts Stock” began to rally as the broader-than-expected measures attempted to restore confidence in investors. The SHSZ300 index jumped with the largest increase in four years. China’s CSI300 blue-chip index also gined 0.35%, while Hong Kong’s Hang Seng Index went up 1.5%. Among the stocks benefiting from the measures are e-commerce groups JD.com (+8.3%), Alibaba (+6.3%) and PDD (+8.3%), as well as EV makers Li Auto (+7.8%), NIO (+7.6%) and XPeng Motors (+7.3%). JD.com once grew 13.91% to 33.90 USD/share, while Alibaba also reached a 7.8% increase at one point.
Commentators are mostly cautiously optimistic but the boost faded the day after. While it still requires continuous monitoring to see how well the economic stimulus works for China, the Chinese business’ performances are the real indicator for investors. With Double 11 just around the corner, how the post-618 strategies of focusing on GMV works for the e-commerce platforms, and how they and the automotive companies globalise also need to be watched closely.
