China's Market Lifeline: How Li Qiang's Bold Moves Aim to Stabilize Stocks and Property Amid Trade Turmoil

The Chinese government has doubled down on efforts to stabilize its financial markets, with Premier Li Qiang’s April 18 directive to bolster support for stocks and property markets underscoring the urgency of addressing economic headwinds. Amid escalating U.S. trade pressures—most notably tariffs on Chinese exports reaching 145% on some goods—Beijing is prioritizing fiscal stimulus, regulatory adjustments, and strategic economic reforms to counter external shocks.

Policy Measures: Fiscal Leverage and Property Market Stabilization

At the April 18 cabinet meeting, Li Qiang emphasized the need to “break norms” and act swiftly to stabilize markets. Key measures include:
- Fiscal stimulus: Analysts anticipate a 1.5–2 percentage point GDP increase in borrowing for 2025, funding infrastructure projects and property market interventions.
- Property destocking: UBS economists highlight the critical role of reducing excess housing inventory to prevent a sector collapse, which could drag down GDP growth.
- Sector liberalization: Beijing plans to open healthcare and telecommunications to foreign investment, aiming to diversify economic drivers and attract capital.

These moves reflect a pivot toward fiscal expansion over monetary easing, given constraints like banking sector fragility and currency stability risks.

Trade Tensions and Economic Pressures

The policy push is framed by the U.S.-China trade war’s deepening impact. U.S. tariffs and restrictions on advanced chip exports have heightened uncertainty, with China’s commerce ministry warning of non-tariff retaliation, such as halting Boeing aircraft deliveries. Meanwhile, UBS has slashed its 2025 China GDP growth forecast to 3.4%, far below Beijing’s 5% target, despite first-quarter GDP growth exceeding expectations.

Investors are pricing in the anxiety: the U.S. Commodity Exchange’s gold futures hit a record $3,261.62/ounce in April, while Asian semiconductor stocks like Taiwan Semiconductor and Samsung faced volatility. For China, the stakes are clear—failure to stabilize markets could exacerbate capital flight and consumer pessimism.

Market Reactions and Strategic Trade-offs

While Premier Li’s statements have buoyed sentiment, execution remains critical. Property developers, such as Evergrande and China Vanke, face liquidity challenges despite government support. Meanwhile, **** show mixed trends, with some cities seeing declines despite policy interventions.

The government’s refusal to match U.S. tariff hikes—calling it a “numbers game”—suggests it will rely on domestic measures rather than escalation. This includes pushing trade negotiations with Washington, where a deal is reportedly within three to four weeks of completion. However, analysts caution that even a partial agreement may not offset the damage already done to export-dependent sectors.

Conclusion: A High-Stakes Gamble

Premier Li’s strategy hinges on a delicate balance: fiscal firepower must offset trade-related slowdowns without inflating debt risks, while property markets need stabilization without overpromising. The 1.5–2% GDP fiscal stimulus is a bold move, but it faces headwinds from a 3.4% GDP forecast that already assumes strain.

Investors should watch two key indicators:
1. Property inventory levels: A sustained reduction could signal progress, while further increases would raise fears of a sector implosion.
2. Service sector liberalization outcomes: Success in attracting foreign capital to healthcare or telecom could diversify growth drivers, easing reliance on exports.

For now, markets are pricing in hope over reality. The Shanghai Composite’s rebound from April lows to 3,400 points (as of mid-April) reflects optimism about policy support, but durability will depend on whether Beijing can turn rhetoric into tangible growth. With the U.S. trade deadline looming, the next few months will test whether Li Qiang’s lifeline is enough to keep China’s economy—and its markets—afloat.