China’s leadership has ramped up efforts to support the nation’s slowing economy, implementing a series of fiscal and monetary policies that have triggered a significant market rebound.
Over the past week, the government introduced measures such as reserve requirement ratio (RRR) cuts, rate reductions, and moves to bolster stock markets. This has resulted in one of the strongest weekly performances for Chinese equities in years.
The CSI 300 index, tracking major companies listed on the Shanghai and Shenzhen stock exchanges, surged 3.6% on Friday and is set for a 15% weekly gain—the highest since 2008. Hong Kong’s Hang Seng index rose nearly 13% for the week, marking its best performance since 1998. Additionally, mainland property stocks jumped 20%, while commodity prices, including iron ore and copper, also spiked.
Despite the current rally, there is caution about whether the upward momentum will last. China’s stock markets have historically underperformed compared to global benchmarks, with the CSI 300 remaining at levels similar to those of 2007, while the S&P 500 has grown almost 300% over the same period.
Investors remain wary of consumer spending trends. With China’s “Golden Week” holiday next week, the country’s markets will close for several days, raising concerns that Hong Kong’s rally could continue without domestic participation. Analysts suggest that China’s efforts to restore investor confidence will require sustained fiscal support to prevent a deeper economic slowdown.
China’s policy measures also had ripple effects across global markets, particularly those with strong trade ties to the country. Commodities like iron ore and copper saw notable price increases, while Asian markets exposed to China’s economy also benefited from a shift in risk sentiment. Investors anticipate further Chinese government interventions in the coming weeks, including the potential issuance of 2 trillion yuan ($284 billion) in special sovereign bonds, aimed at boosting growth and encouraging long-term investment.
Reuters, Bloomberg, and Financial Times contributed to this report.
