China’s National Development and Reform Commission (NDRC) announced a 200 billion yuan ($28 billion) investment package for local governments on Tuesday, a move aimed at bolstering economic growth but falling short of the massive stimulus package many investors had anticipated, CNN reports.
The news, revealed at a press conference, sent shockwaves through the market, with Hong Kong and mainland Chinese stock indices experiencing a sharp downturn after an initial surge in optimism.
While the NDRC chairman, Zheng Shanjie, expressed confidence in achieving the country’s 5% growth target for the year, the announcement comes amidst a series of economic struggles, including a property crisis, weak spending, and high youth unemployment, according to the report.
The stimulus package, which includes 100 billion yuan from the central government and an additional 100 billion yuan for investment projects, is significantly less than the 2 trillion yuan ($285 billion) package economists had predicted.
Investors were expecting a more robust “bazooka” announcement, particularly following Chinese leader Xi Jinping’s approval of a growth plan in late September after months of dismal economic data.
The initial market reaction to the announcement was positive, with Shanghai and Shenzhen blue-chip stocks surging by over 9% at the market open. However, the limited scope of the stimulus package quickly dampened the enthusiasm, leading to a 6% decline in the same stocks. Hong Kong’s Hang Seng Index, which had enjoyed its best two-week period in over two decades, also lost over 5%.
Prior to the announcement, China had already implemented a number of monetary policy measures to stimulate the economy, including a cut in interest rates, reductions in reserve requirements for banks, and support for the property sector.
