Hong Kong — For nearly four years, Francis Lun, who runs a modest brokerage in Hong Kong, has been navigating the stormy waters of a declining stock market and pandemic-related disruptions. The Hang Seng Index, a key indicator of the city’s economic health, had been in freefall, dragged down by economic struggles and restrictive measures imposed in both Hong Kong and mainland China. But in late September, a glimmer of hope appeared when Beijing announced a series of economic stimulus measures that jolted the market back to life.
Since then, the Hang Seng Index has surged by more than 18%, marking its largest two-week rally in nearly 20 years. For Lun and others in the financial sector, the change has been a welcome relief. “We were just sitting around, waiting for something to happen,” Lun recalls. “But now, things are moving again. We’re getting calls, and the market is coming back to life.”
The question now is whether this rally can be sustained and, more importantly, whether the benefits will extend beyond the stock market to the broader economy, which is still grappling with significant challenges. Economists have raised concerns about China’s ability to meet its 5% growth target this year, pointing to the possibility of deflation and a lack of consumer confidence. While the initial response to the stimulus measures has been positive, many believe that more needs to be done to address the underlying issues in China’s economy.
So far, Beijing’s efforts have focused primarily on monetary policy—adjusting interest rates and banking regulations to manage inflation and borrowing costs. While these measures have helped stabilize the financial markets, they do little to address the deeper structural problems facing the economy. Many economists argue that China needs a more aggressive fiscal policy—one that involves increased government spending on public infrastructure and consumer-driven projects.
A report from Nikko Asset Management highlighted this issue, noting that the real challenge lies in rebuilding consumer confidence. Without bold fiscal policies, the report warned, the economy risks falling into a prolonged slump. Economists are calling for the Chinese government to take more decisive action, including implementing large-scale public works projects and providing subsidies to encourage consumer spending.
Ray Dalio, the founder of Bridgewater Associates, has also weighed in on the situation, suggesting that this could be China’s “whatever it takes” moment. In a social media post, Dalio called on China’s leaders to go beyond the measures they have already announced and take more sweeping action to stabilize the economy and restore confidence.
There are signs that Beijing may be preparing to do just that. The National Development Reform Commission, China’s top economic planning body, is expected to announce a new package of policies aimed at boosting growth. These measures could include increased public spending on infrastructure and consumer goods, as well as additional subsidies to encourage people to make large purchases, such as home appliances or vehicles.
One area of particular concern is the property market, which has long been a drag on China’s economic growth. At a recent joint press conference, key financial officials announced a series of measures aimed at stabilizing the housing market, including cuts to mortgage rates and reductions in down payments for second-home buyers. These measures are designed to encourage new investment in the property sector, which has been struggling with oversupply and declining prices.
The press conference itself was notable for its transparency—a rarity in China’s typically opaque policymaking process. The event, which featured high-ranking officials from the People’s Bank of China and other regulatory bodies, was seen as a clear indication that Beijing is taking the situation seriously and is committed to addressing the challenges facing the economy.
However, many analysts caution that the road to recovery will be long and difficult. While the recent stimulus measures have provided a much-needed boost to the stock market, the broader economy remains fragile. Without a sustained commitment from China’s leadership, it is unclear whether the current momentum can be maintained. Some economists, such as Jia Kang, a former director at the Ministry of Finance, have called for even more aggressive action. Jia has suggested that China should issue up to 10 trillion yuan in long-term bonds to fund large-scale infrastructure projects, arguing that this level of investment is necessary to prevent the economy from stagnating further.
As China prepares to roll out additional policies, the world is watching closely. The success or failure of these efforts will have significant implications not only for China but for the global economy as a whole. For now, all eyes are on Beijing as it navigates this critical moment and seeks to steer the country back toward sustained growth.
