Xi Jinping’s major fiscal stimulus package, which could have capitalised on the big bounce in the sharemarket, has so far failed to materialise.
China’s economic policymakers may have missed a major opportunity to capitalise on the frenetic response of sharemarket investors to the big monetary policy stimulus package its central bank unveiled a fortnight ago.
Analysts from the major foreign investment banks were predicting the announcement of 2 trillion to 3 trillion yuan of new spending, and some inside China thought it might be as much as 10 trillion yuan.There was no announcement of significant new spending, only the bringing forward of about 200 billion yuan of bond issues from next year to fund spending and investment, which is hardly enough to move the dial in a 126 trillion yuan economy.
The PBOC not only ignited the sharemarket but, in the major cities, at least, there was a significant surge in high-end property market activity and spending during the “Golden Week” holiday to celebrate China’s national day that ended Monday was also up significantly on last year’s . Until that monetary policy stimulus was unveiled Beijing’s measures had largely been cautious, small-scale, piecemeal and largely ineffective.
It is that strategy that has resulted in significant excess capacity across China’s economy, leading to increased industrial output and volumes of exports but slumping prices and profitability. It has also generated a growing protectionist backlash from China’s major trading partners.
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