PLS chart, page-23325

Reading Lies&damnlies' 2 posts above made me read again about the recent economic stimulus launched by the Chinese government.

This is what I read in SCMP, 3 Oct 2024, written by Ralph Jennings:

https://www.scmp.com/economy/policy/article/3280948/how-chinas-2024-stimulus-compares-past-packages-and-whats-next?module=perpetual_scroll_0&pgtype=article

"The total size of China’s stimulus package this year, including plans announced last week, is estimated to be about 7.5 trillion yuan (US$1.07 trillion), or equivalent to 6 per cent of the country’s GDP in 2024, Deutsche Bank said in a research note on Thursday." (my emphasis)

How is that huge amount of money going to be spend? From the same article:

"The 7.5-trillion-yuan estimate includes a combined 2.5 trillion yuan cut in mortgage-debt servicing and two new 800 billion yuan “facilities” for the stock market, according to announcements on September 24 by the People’s Bank of China." (my emphasis)

What does that mean exactly? An article in The Guardian sheds light on that question:

"Adopting a suite of measures to reduce borrowing costs, the People’s Bank of China cut interest rates on existing mortgages by 0.5 percentage points and supported new lending by reducing the level of reserves banks must set aside before making loans.

The bank’s governor, Pan Gongsheng, said he would also ease restrictions on borrowing to invest in stocks and shares on Chinese exchanges, boosting the Shanghai composite index by more than 4% within hours of the announcement. Oil prices rose, with Brent crude up more than 1% at nearly $75 a barrel." (my emphasis)

https://www.theguardian.com/world/2024/sep/24/china-economy-stimulus-package-measures-yuan-pbc

So basically the Chinese government has stimulated the economy by making investment in property and stock market easier and costing less. It is not by the Chinese government buying shares in the stock market to pump it up as hinted by Lies.

The more than 25% rally in Chinese stock indexes (not only on Ganfeng and Tianqi) is caused by investors' positive reaction to the stimulus initiatives. There is nothing contrived or artificial about it. The stimulus initiatives simply have switched the Chinese investors' mood to RISK ON.

How far will that go? I don't know.