China’s Stock Rally Cools as Beijing Holds Off on Major Stimulus

The Chinese stock market, which had been on a remarkable rally following the announcement of stimulus measures by the People's Bank of China (PBoC), has begun to cool down as investors await major fiscal stimulus from the Ministry of Finance. The delay in fiscal support has raised concerns about the sustainability of the market's recent gains and the overall economic outlook.

In late September, the PBoC unveiled a series of monetary stimulus measures, including interest rate cuts and a reduction in the reserve requirement ratio. These moves, coupled with the relaxation of property transaction restrictions in major cities, sparked a surge in investor sentiment and market confidence. The CSI 300 index, which tracks companies listed in Shanghai and Shenzhen, rose by 24% in just a few trading days before the National Day holidays.

However, the rally has since slowed down as investors anticipate more significant fiscal support from the Ministry of Finance. Despite reports of planned fiscal policies, no major initiatives have been announced yet. This delay has led some investors to exercise caution and reassess their expectations for the market.


The lack of major fiscal stimulus has raised concerns about the sustainability of the market's recent gains and the overall economic outlook. A survey conducted by the China Beige Book, a research firm, found that small and medium-sized enterprises (SMEs) in China are still struggling with weak demand and high financing costs. Without substantial fiscal support, these challenges may persist, hindering the economic recovery.

Moreover, other economic indicators, such as GDP growth and consumer confidence, have been influenced by the lack of major fiscal stimulus. The World Bank recently downgraded its growth forecast for China to 4.3% for 2024, reflecting the ongoing economic headwinds. The slowdown in consumer spending and investment has also contributed to the deceleration in economic growth.


To maintain market momentum and support economic growth without significant fiscal stimulus, Beijing could explore alternative measures. These could include targeted tax cuts, infrastructure investments, and reforms to boost productivity and innovation. Additionally, the government could focus on addressing structural issues in the economy, such as the property market and state-owned enterprises, to enhance long-term growth prospects.

In conclusion, the Chinese stock market rally has cooled down as investors await major fiscal stimulus from the Ministry of Finance. The delay in fiscal support has raised concerns about the sustainability of the market's recent gains and the overall economic outlook. To maintain market momentum and support economic growth, Beijing should consider alternative measures and address structural issues in the economy.