China’s stimulus policy: why leadership, foreign investors can’t see eye to eye

It’s been a tumultuous two months since Beijing fired off a salvo to shore up China’s economy, and divergent perceptions show not everyone is on the same page

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Frank Chenin Shanghai

Published: 6:00am, 30 Nov 2024Updated: 6:41am, 30 Nov 2024

For countless foreigners, their investment strategy over the past two years was as easy as ABC.

“Anything but China”, became an increasingly common mantra and mindset, often abbreviated in everyday discourse to “ABC”. Trade publications and consultants warned there was too much risk and too little upside as the world’s second-largest economy sputtered and struggled to regain its footing after the pandemic.

But two months ago, that thinking was challenged by what appeared to be a sharp U-turn in China’s economic policies. And in the weeks that followed, hope arose that national-level changes could sustain a long-awaited bull run while stamping out the ABC ethos.

Chinese stocks, as measured by Hong Kong’s Hang Seng Index, surged 12 per cent in the first 30 days after Beijing fired off a monetary policy bazooka on September 24. But the gains were short-lived, scaling back as market participants were disappointed by fiscal measures that fell short of their elevated expectations.

Meanwhile, Beijing has taken every opportunity to hail economic improvements and bolster confidence, including by releasing positive datasets early and using state mouthpieces to trumpet positivity, even as the two sides seem to have reached a consensus on the root causes of challenges – an ongoing property crisis, persistent local government debt woes, and weak consumption.

The official messages out of Beijing reflect the pursuit of a “slow-moving bull” in the market, rather than a “crazy bull”, after officials were called on to be “fearless and bold” in boosting the economy.

All the while, anxious foreign investors continue to wait for China’s trickle of stimulus measures to disperse the economic storm clouds and reinvigorate the market.