Investors are closely watching Beijing as the Chinese government prepares to announce new policies aimed at boosting the economy.
China is expected to unveil these measures this weekend, with hopes for a significant fiscal stimulus package to address mounting economic challenges.
Earlier this week, investors were left disappointed when China’s top state planner, the National Development and Reform Commission (NDRC), announced smaller-than-expected actions, resulting in days of volatility in the Chinese stock market. With China at risk of missing its annual economic growth target of 5%, many analysts and investors are hopeful that a more substantial stimulus will be unveiled at a press conference scheduled for Saturday, led by Finance Minister Lan Fo’an.
The stakes are high as the world’s second-largest economy faces slowing growth, falling consumer confidence, and high levels of local government debt. Some analysts have suggested that China could announce a fiscal package ranging between 2 to 3 trillion yuan (approximately $283 billion to $424 billion), though others remain skeptical. Larger figures, such as a 10 trillion yuan package ($1.4 trillion), have also been floated, though many experts believe a more modest approach will be taken.
Earlier in the year, Chinese officials introduced measures to stimulate the economy, including interest rate cuts, lower reserve requirements for banks, and easing property purchase restrictions. While these moves sparked a rally in Chinese markets, they were not enough to sustain long-term investor confidence, particularly as data continues to show weak consumer demand and deflationary trends.
The anticipated stimulus package is expected to focus on stimulating domestic consumption, providing support for local governments, and recapitalizing banks. Some analysts predict that social welfare spending could be a key component of the package, aimed at freeing up household savings to boost consumption. There are also calls for targeted subsidies for lower-income households and families with children, along with incentives to encourage spending on consumer goods and cars.
However, there are concerns that an excessively large stimulus package could signal deeper economic problems, potentially leading Beijing to phase out stimulus measures over time rather than announcing a large package all at once.
While expectations for a major stimulus are high, experts caution that any significant changes to fiscal policy would require approval through China’s legislative processes. Dong Yu, a former official with China’s economic planning committee, has emphasized that a large-scale fiscal package may eventually come, but patience will be necessary.
As investors await the announcement, the broader market remains volatile, and many are looking for clear forward guidance for 2025, especially regarding fiscal policy and potential expansions in government borrowing. The meeting of the National People’s Congress Standing Committee, set for later this month, could provide more details on any further measures.
CNBC, the Wall Street Journal, Bloomberg contributed to this report.
