For months, Chinese markets have been pounded by headwinds such as Covid-19 outbreaks, US delisting fears, crackdowns on a variety of local enterprises, an implosion housing market, and Beijing's ally Russia's continuous assault of Ukraine.
The Chinese government has had enough. They met on Wednesday to form the Financial Stability and Development Committee, which is controlled by China's cabinet, the State Council. What resulted were extensive pledges of assistance for China's ailing economy.
According to the official Xinhua News Agency, the conference decided, "Monetary policy should take the lead to deal with the issue, while new loans should maintain an acceptable expansion."
Vice Premier Liu He, who chairs the committee, made the statements, which sparked a strong rise in stock prices. He promised, among other things, that China will "boost the economy in the first quarter" and implement "market-friendly policies."
In China's inner circle, Liu is undoubtedly the most influential economic voice. President Xi Jinping was a boyhood buddy of his, and he graduated from Harvard University . During the trade dispute with the United States, he was in charge of China's negotiations.
Analysts and economists have reacted to China's announcements as follows:
— “Liu His statements have a lot of weight behind them. "We anticipate the government to disclose more pro-market news one by one," said Iris Pang, ING Wholesale Banking's head economist for Greater China.
— "We are expected to see more specific policies roll out in the coming weeks," said Hao Hong, general director of BOCOM International, a subsidiary of the Bank of Communication.
"The verbal intervention has been quite forceful," said Raymond Yeung, chief economist for Greater China at ANZ Bank. Liu He's message has never been more clear: the Chinese government favors a stable capital market over a tumultuous one."
— "We regard the action as a circuit breaker following the stock market's downward spiral, and it's largely in line with our expectations for accommodating policy in the run-up to the 20th Party Congress," said Kinger Lau, Goldman Sachs' senior China equity analyst.
"We feel that more substantial policy follow through would be required to pull the equity risk premium down from its lofty levels," Lau added.
— "I'd put money on the government wanting China's IT industry to continue developing and competing worldwide," said Tariq Dennison, a fund manager at GFM Asset Management in Hong Kong.
"Removing Chinese businesses from U.S. markets is certainly a negative here," Dennison added, "but it's not a full barrier if international investors can still benefit freely from shares listed in Hong Kong or through Stock Connect."
After the discovery of a new, potentially vaccine-resistant coronavirus type, investors dumped riskier assets for the perceived safety of bonds, the yen, and the dollar, Bitcoin fell almost 9% on Friday, bringing smaller tokens down with it.Crypto
Oil rose 4% to roughly $124 per barrel, considerably below the $130 level reached Sunday night in response to threats of a ban. Much of the anticipated drop in oil production has already been reflected in the commodity's price.Stocks