A China yuan note is seen in this illustration photo May 31, 2017. REUTERS/Thomas White/Illustration
HONG KONG, Sept 24 (Reuters Breakingviews) – Beijing’s efforts to shore up Chinese stocks have been paying off. Officials deserve credit for the 52% jump in the total market value of the domestic A-share market over the past 12 months. Assuming the rally endures, it could boost consumer spending and presage a healthier economy. But the property slump leaves President Xi Jinping’s goal of reflating asset prices incomplete.
On Wednesday, state-run media outlets were busy talking up what financial regulators have achieved after they rolled out, opens new tab a raft of policies exactly a year earlier to jolt a stock market that at the time was largely deemed “uninvestable” by foreign money managers. The total value of shares traded on domestic bourses has since surged to 104 trillion yuan ($14.6 trillion) from 68 trillion yuan. The shares of more than 1,500 companies listed in Shanghai or Shenzhen have doubled.
Other factors, not least DeepSeek’s breakthrough in artificial intelligence, have also boosted sentiment. Corporate earnings, including those of offshore-listed technology firms, grew by an average 6% in the first half of this year and are still improving, according to Goldman Sachs analysts, who reckon the set up for a “slow bull” market seems more solid now.
That judgment comes after a rollercoaster ride that called the initial rally’s sustainability into question. Chinese stocks shot up more than 25% in less than two weeks after the regulatory announcement on September 24 last year, but quickly pared half of the gain.
A strong stock market has been crucial to Xi’s planning. It offers a much-needed alternative to property for parking household savings. Higher shareholder returns can boost consumer confidence and even boost spending by local governments, whose holdings accounted for nearly half of the market value of Chinese equities by the end of last year, per Goldman. These authorities’ finances are dire: their unpaid bills alone exceed $1 trillion, with Beijing planning to ask policy banks and state lenders to extend them some credit to help.
Xi’s administration has been keen to reinflate real-estate prices, too. But efforts on this front have not been working. Property investment slumped another 12.9% year-on-year in the January-to-August period. China Vanke (000002.SZ), opens new tab, one of the few major developers not to default, is in talks, opens new tab with creditors to cut interest payments, Bloomberg reported on Wednesday, citing sources.
Fashioning a strong stock market is important. But it may just mark the end of the beginning of reinvigorating China’s $19 trillion economy.
Editing by Antony Currie; Production by Aditya Srivastav
Chan Ka Sing is China Columnist for Reuters Breakingviews. Prior to joining Reuters, he worked at Week in China, Hong Kong Economic Journal and Dow Jones Newswires.
