After China began the week with a dismal economy report announcing both a fifth consecutive month of plummeting manufacturing and a stationary services sector, the stock market exploded. A burst of trade activity saw shares worth €128 billion swiftly changing hands across Shanghai, Shenzhen and Beijing. The fever-pitch trading session pushed the central CSI 300 index 25% higher than its position the previous Tuesday.
Despite the disappointing economic data, the market managed to bounce back, heavily influenced by the flurry of policy decisions Beijing has released over the past seven days. Following almost two years of metered, uncoordinated attempts to resurrect the Chinese economy after the Covid-19 crisis, it now appears that the authorities have swung into crisis response mode.
Last week marked the beginning with a move from the People’s Bank of China to slash key interest rates and decrease the level of cash banks are required to have on hand. Included in their promises were plans to facilitate corporate share buy-backs and infuse billions into the stock market.
Aiding mortgage holders, rates for existing mortgages were dropped to align with those for new ones over the weekend. In addition, on Sunday evening, Shanghai, Shenzhen and Guangzhou declared the removal of any remaining home purchase restrictions.
While all this has been taking place, the Communist Party’s central committee advanced a discussion from last week on the state of the economy and pointed towards additional help for the beleaguered property sector. Initial actions have majorly been monetary, but future actions are expected to be fiscal.
Predictions for these policies include amplifying support for debt-ridden local governments — the primary providers of public services in China — as well as cash support for families with more than one child. Measures to increase the income of the nations close to 300 million migrant workers, who maintain residences in rural areas while living in urban zones, could also be on the agenda.