China’s recent stock market rally has hit a snag after much-anticipated announcements aimed at revitalizing the struggling economy. Following the Golden Week holiday, trading saw shares surge over 10%, but that optimism quickly dissipated after a news conference held by the nation’s economic planners.
At the end of a tumultuous trading day, the Shanghai Composite Index managed to close up by 4.6%. In stark contrast, Hong Kong’s Hang Seng Index faced a sharp decline of 9.4%. Investors had eagerly awaited concrete plans from the government to spur economic growth, but the details presented were lacking, leaving many feeling underwhelmed.
Zheng Shanjie, chairman of China’s National Development and Reform Commission, stated his “full confidence” in reaching the country’s economic and social targets for the year. However, he did acknowledge, “The downward pressures on China’s economy are also increasing.”
During the conference, Mr. Zheng revealed that the government aims to allocate 200 billion yuan (approximately $28 billion or £21.5 billion) for various spending and investment initiatives by the year’s end.
Alicia Garcia-Herrero, the chief economist for the Asia Pacific region at investment bank Natixis, commented, “The market really expected more. The correction will be even stronger if the data on Golden Week consumption is weak.” She emphasized that investor sentiment is reacting to the perceived absence of substantial fiscal stimulus and raised questions about the decision to hold a press conference without providing new, impactful information.
As concerns grow about the possibility of falling short of its own annual growth target of 5%, the Chinese government continues its efforts to reassure stakeholders in the world’s second-largest economy.
