“Never give a sword to a man who can’t dance.” – Confucius
Beijing’s Intervention
Are Chinese stocks, bolstered by new government measures, at a turning point?
From Monday through Thursday this week, the Shanghai Composite Index increased by 5.52 percent, while Hong Kong’s Hang Seng Index rose by 3.53 percent during the same period.
Despite these gains, there is still a significant recovery ahead. Since September 2021, the Shanghai Composite Index has dropped by 22.61 percent, and the Hang Seng Index has experienced a decline of over 50 percent in the past six years.
Overall, Chinese stocks have seen a staggering loss of $7 trillion since 2021, leading to mounting pressure on President Xi Jinping.
In previous years, Xi took pride in his motto: “The East is rising, the West is declining.” Now, however, he finds himself urging regulators to formulate a rescue plan.
In late January, Beijing unveiled several strategies aimed at stimulating the economy and revitalizing the stock market. Notably, on February 5, the central bank reduced reserve ratio requirements by 50 basis points, which is expected to unlock approximately one trillion yuan (around $139.04 billion) in long-term funds. Continue reading
In summary, while recent government actions show a potential shift in momentum for Chinese stocks, the road to recovery appears long and challenging. The Chinese markets have lost substantial value, and it remains to be seen whether these interventions will produce sustained positive results.
