China | Here comes China's Draghi moment

Amid the weak economic activities in the past years, the authorities have promulgated a large size stimulus package to support growth that the market views as "China's Draghi moment" or "Chinese style QE".

Key points

• Key points:
• The global markets are paying close attention to Chinese authorities’ jumbo size monetary stimulus package which was announced on Sep 24 after a series of lacklustre economic activities data in the past months which made the “5% growth target” difficult to achieve.
• Following the monetary stimulus jumbo package on Tuesday last week, the authorities in the Politburo meeting which was held yesterday also promulgated a series of comprehensive stimulus plan beyond the above-stated monetary stimulus package, which focused on the fiscal expansion, real estate stimulus and other policy support on consumption, etc.
• The Chinese stock markets together with the Hang Seng Index in HK rallied significantly to historical high after the jumbo size stimulus package.
• We first of all introduce the details of what these stimulus measures are, and then we analyse its impact on financial markets and real economy.
• Our basic conclusion is we agree the stock market carnival will last for a while due to the new stock market stimulus measures which equivalent to the central bank using its own balance sheet to inject liquidity into stock markets, but the transmission from the stimulus package to the real economy takes time and requires careful implementation of these measures.

Authors

Geographies

Topics

Tags