China announced a new fiscal stimulus policy on the 8th, increasing the debt ceiling for local governments to 6 trillion yuan, which will be used to replace existing hidden debts. At the same time, starting from 2024, local government special bonds will be added annually for five consecutive years, totaling 800 billion yuan each year, to supplement government funds for debt repayment. The total amount of hidden debts that can be replaced will reach 4 trillion yuan, making the overall scale of fiscal stimulus reach 10 trillion yuan.
However, on the first trading day after the policy was announced, although the three major A-share indexes rose, the overall increase was not as significant as the market reaction after the real estate policy was released at the end of September, and there was no similar celebration rally.
Yesterday (11th), the three major A-share indexes collectively rose, with the Shanghai Composite Index up 0.51% to close at 3,470.07 points, the Shenzhen Component Index up 2.03%, and the ChiNext Index up 3.05%. The number of stocks that rose in the overall market exceeded 3,900, and the total turnover of the Shanghai and Shenzhen markets reached 2.5 trillion yuan. However, compared with the stock market surge caused by the new policy stimulus at the end of September, the market reaction this time was relatively calm.
At the opening today, the three major A-share indexes initially rose but quickly fell back. As of the deadline, the Shanghai Composite Index fell slightly by 0.06% to 3,467.92 points, the ChiNext Index rose by 1.78% to 2,435.11 points, and the Shenzhen Component Index rose by 1.02% to 11,504.37 points.
Although the new round of fiscal stimulus policies failed to significantly boost the market, authoritative experts emphasized that China’s monetary policy will continue to maintain a supportive stance. The expert stated that the intensity of monetary policy this year is the highest in recent years and has been widely recognized by the market. It is expected that the supportive tone of monetary policy in the short term will not change, and next year’s monetary policy is expected to maintain a strong intensity, providing a good monetary and financial environment for stable economic growth and high-quality development.
Considering factors such as changes in the macro environment, index structure, trading distribution, and technical indicators, China International Capital Corporation (CICC) pointed out:
Looking to the future direction of China’s policies, recently, Pan Gongsheng, the Governor of the People’s Bank of China, delivered a report on the financial work of the State Council at the 12th meeting of the Standing Committee of the National People’s Congress, explaining the future work focus of the People’s Bank of China. The main directions of work outlined in the report are as follows:
1. Strengthen monetary policy adjustments to support stable economic growth: China will increase the counter-cyclical adjustment of monetary policy to create a favorable financial environment for stable economic growth. This includes maintaining market liquidity, reducing financing costs for enterprises and residents, and providing support to strategic key areas and weak links through various policy tools, stabilizing the exchange rate of the renminbi, and guarding against exchange rate risks.
2. Strengthen financial supervision and effectively improve regulatory effectiveness: China will comprehensively strengthen financial supervision, strictly enforce the responsibilities of intermediary institutions as “gatekeepers,” and enhance the protection of financial consumers’ and investors’ rights and interests. At the same time, it will promote the legislative work of laws such as the Financial Stability Law and the Anti-Money Laundering Law, and accelerate the formulation and revision of laws and regulations including the People’s Bank of China Law, the Commercial Bank Law, the Securities Investment Fund Law, and the Regulations on the Management of State-owned Financial Capital.
3. Continuously improve the quality and efficiency of financial services to support high-quality economic development: The focus will be on optimizing the credit structure by motivating and guiding financial institutions. It will strengthen financial support for new productive forces and improve the mechanism for venture capital fundraising, investment, management, and exit. In addition, the People’s Bank of China plans to guide financial capital to invest in early-stage, small-scale, long-term, and hard technology to meet the financing needs of technology-oriented enterprises in different stages of their life cycle. It will vigorously develop technology innovation bonds and green bonds, implement credit due diligence exemptions, and continue to promote the establishment of a government financing guarantee system.
4. Deepen financial reforms and accelerate the construction of a modern financial system with Chinese characteristics: China will accelerate the establishment of a modern financial system with Chinese characteristics, improve the implementation mechanism of monetary policy, and support large banks in replenishing capital. It will also deepen the reform of rural credit cooperatives, expand the channels for foreign investors to invest in the domestic capital market, develop a multi-tiered bond market, improve payment services for key groups, and establish a sound domestically controllable cross-border payment system. The construction of international financial centers in Hong Kong and Shanghai will be promoted steadily, and the internationalization of the renminbi will be further advanced.
5. Prevent and resolve financial risks and maintain financial stability: China will optimize the mechanism for preventing and controlling financial risks, strengthen the risk early warning role of financial supervision, and properly handle the debt problems of local government financing platforms. In addition, it will further improve policy tools to deal with abnormal fluctuations in the stock market and ensure the stable and healthy operation of the financial market.