Expectations Rise for Fiscal Stimulus: Anticipation and Reality of Subsequent Policies (AI Translation)
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文｜财新 程思炜
By Cheng Siwei, Caixin
【金融我闻/程思炜】有些出乎意料，这一轮中国式的经济刺激是从股市开始的。似乎就在一夜之间，市场预期扭转，久违的牛市气氛迅速聚拢，甚至令人开始担心疯牛重现。（参见《财新周刊》2024年第39期封面文章《中国式经济刺激》、《A股强心针》）
【Finance Insights/Cheng Siwei】 Somewhat unexpectedly, this latest round of Chinese-style economic stimulus began with the stock market. Almost overnight, market expectations reversed, and the long-absent bullish atmosphere quickly gathered momentum, even sparking concerns of a rampant bull market making a comeback. (See the cover story "Chinese-Style Economic Stimulus" and "The A-Share Booster" in the 39th issue of Caixin Weekly, 2024)
2024年9月最后一周，中国A股行情在政策驱动下迅速升温，然后经历国庆假期的情绪酝酿，以及港股大涨9.3%的烈火，迎来了节后首个交易日：10月8日，A股主要指数集体大幅高开，沪指干脆以涨停开盘，一步站上3674点；随后半小时内沪深两市万亿元成交额，刷新历史记录。
In the last week of September 2024, China's A-shares market heated up rapidly under policy-driven factors. Following the emotional buildup over the National Day holiday and a robust 9.3% surge in Hong Kong stocks, the A-shares market opened for the first trading day post-holiday on October 8. Major A-share indices collectively opened significantly higher, with the Shanghai Composite Index decisively hitting the daily limit at the opening, reaching the 3,674-point mark. Within the following half-hour, the combined turnover of the Shanghai and Shenzhen markets hit one trillion yuan, setting a new historical record.
同日10点，国新办按照计划召开新闻发布会，国家发改委主任郑栅洁与四名副主任上阵吹风。不过，除了宣布在10月底提前下达2025年1000亿元中央预算内投资计划和1000亿元“两重”（国家重大战略实施和重点领域安全能力建设）项目清单有实质增量，发布会的其他内容缺乏亮点，主要在解释如何落实存量政策。
On the same day at 10 a.m., the State Council Information Office held a scheduled press conference where Zheng Shanjie, Director of the National Development and Reform Commission, along with four deputy directors took the stage. However, aside from announcing the advance allocation of RMB 100 billion in the central government budget for 2025 and an additional RMB 100 billion for "two major areas" (national major strategic implementation and key areas of security capacity building) by late October, the rest of the press conference lacked highlights and primarily focused on explaining how to implement existing policies.
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- China's recent economic stimulus initiated with a boost in the stock market, as major indices showed significant gains post-holiday in early October 2024.
- Key financial measures, including interest rate cuts and relaxed real estate policies, sparked growth in both real estate and stock markets, with the Shanghai Composite Index rising 4.59% and stimulus expectations remaining high.
- A large-scale economic stimulus package is proposed, potentially involving fiscal expansion and structural reforms, to enhance consumption and support economic recovery, targeting a possible 10 trillion yuan effort over one to two years.
In the latest round of Chinese-style economic stimulus, unexpected developments have caused a brisk turnaround in market expectations, with the stock market being the initial trigger for this shift. Policy-driven factors spurred a rapid rise in China's A-shares at the end of September 2024, leading to significant trading volumes, especially on October 8 when the Shanghai Composite Index opened at a daily limit, highlighting a sudden bullish sentiment in the market [para. 1]. That same day, a press conference by the State Council revealed upcoming fiscal initiatives but lacked concrete new proposals, leaving the market in anticipation of more policies. This surge led to mixed results: significant increases in mainland indices and an expected correction in Hong Kong markets [para. 2].
The stock market's momentum is now contingent on future policy directions and whether adequate macroeconomic support will come into play to revitalize economic growth. Significantly, the recent financial support and related policies introduced towards the end of September have raised expectations for further fiscal measures to combat insufficient effective demand and lingering deflationary pressures [para. 3].
A significant step was the September 24 policy announcements involving interest rate cuts and reserve ratio reductions, followed closely by a series of policies aimed at revitalizing the real estate market, such as relaxed mortgage rates and new housing policies in major cities including Beijing, Shanghai, and Shenzhen [para. 4]. This led to a marked increase in real estate transactions and buoyed the sector as daily transactions of new homes surged during the National Day holiday. Notably, tourism and cultural sectors also saw improved performance with increased domestic travel and consumption levels [para. 5][para. 6].
Liu Shijin, a noted economist, advocated for a large-scale economic stimulus akin to earlier substantial interventions like the 2008 response, suggesting a comprehensive two-year plan valued at 10 trillion yuan to mitigate demand shortfalls and drive growth [para. 7]. Such stimulus proposals emphasize public services reform and urbanization to boost consumption and moderate investments, addressing demand constraints more broadly [para. 8]. Market predictions about potential fiscal measures vary widely, ranging from filling fiscal gaps to tackling pandemic-induced debts, though consensus is gradually forming around "composite punches" of increased deficits, special bonds, and structural reforms [para. 9].
Currently, there's eagerness in the market for more fiscal actions with adjustments in fiscal policies anticipated, with specific focus areas like debt restructuring and sustaining public investment emphasis. Recently, the issuance of local government special bonds has accelerated, which aids in project financing and fiscal stimulus [para. 10][para. 11]. The anticipated proactive fiscal policy shift marks a notable pivot towards addressing economic needs through innovative fiscal solutions rather than traditional methods, intended to maintain socioeconomic stability and support real estate markets [para. 12].
Subsequent meetings towards year-end, including the Central Politburo and Central Economic Work Conference, are crucial for establishing the economic agenda and confirming the trajectories of policy supports. The outcomes of these meetings, along with budget discussions at the national level, are expected to offer clarity on the roadmap for China's anticipated economic revitalization strategies [para. 13].
- Fosun International
- Fosun International's Chairman, Guo Guangchang, noted that the recent stock market rise positively impacted consumer demand. During the holiday period, Fosun's Atlantis Sanya and Shede Spirits saw rapid sales growth, attributed to the wealth effect from stock market gains.
- Atlantis Sanya
- Atlantis Sanya, under the Fosun International Group, experienced a rapid sales increase during the holiday. Chairman Guo Guangchang noted on October 7 that the stock market surge before the holiday gave consumers a "feeling of wealth," which in turn stimulated demand and contributed to its sales growth during the National Day holiday period.
- Shede Spirits
- During the holiday period, Shede Spirits, part of Fosun International, saw a rapid increase in sales. The surge in stock market prices contributed to a wealth effect that boosted consumer demand, benefiting companies like Shede Spirits.
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