Chinese Measures to Boost Their Economy Take Effect

We always think about the Chinese economy being more or less totally tied to the American economy. However, it’s possible, and being predicted by some, that in the near future, the two countries will “decouple,” and the Chinese economy will take off while the American economy remains in a state of “recovery.”

Certainly, China is in a much better place than America. If they are able to deal with the real estate problem and a couple other domestic problems, they have the global network established which would allow their economy to bounce back.

In America and Europe, there is no reason to believe things will ever get better.


Investors poured nearly $12 billion into Chinese equity funds in the week ending this past Wednesday, Reuters reported on Friday, citing data compiled by Bank of America. It was the largest weekly inflow since 2015 and the second largest on record, according to analysts.

The inflow is a good sign for struggling Chinese stocks, which have lost about $6 trillion over the past three years amid the country’s economic troubles – such as deflation, debt and a crippling real estate crisis – following the Covid-19 pandemic. According to data cited by Reuters, onshore Chinese blue-chip stocks are currently trading near their lowest level in five years, while the Hong Kong benchmark is at its lowest in more than a year.

The latest surge allocations to Chinese stocks follows Beijing’s recent efforts to support the country’s economy, which have included measures to prop up stocks. The central bank announced earlier this week that it would reduce reserve requirements for banks, a move that frees up more liquidity for lending to the economy. Beijing additionally announced measures to ease the liquidity crunch facing real estate developers by allocating 2 trillion yuan ($278 billion) to buy their shares. Operations were also carried out in the foreign exchange market aimed at supporting the yuan.

Buying Chinese shares is currently “the world’s most enticing contrarian long trade’,” Michael Hartnett, the chief strategist of Bank of America’s global research team, told Bloomberg. Earlier, Bridgewater Associates told investors it was “moderately bullish” on Chinese stocks, while Hong Kong-based financial services company Gavekal said Chinese stocks offered the best value in the world, according to its note to Bloomberg.

The real estate problem is probably more complicated than just putting money in it, as the whole economy was geared towards expansion that is no longer really needed.

However, the economy is like a biome, so things affect other things, and if other segments of the economy get rolling, the real estate part should just work itself out.

In the long run, US attacks on the Chinese economy, like those on the Russian economy, will just make it stronger.