By Brian Swint
China stocks were rising early Monday after the country's Politburo, its most important decision-making body, pledged to use fiscal and monetary policy to fan economic growth.
American depositary receipts for retailers Alibaba and JD.com surged 6.6% and 9.4% in premarket trading. Electric vehicle maker NIO was up 8%, and internet-search engine Baidu added 5.5%. Hong Kong's Hang Seng Index finished 2.8% higher.
Officials put out a statement saying that monetary policy would be "moderately loose," a change from the previous stance that it would be "prudent." It's the first time they have used that language in 14 years. It doesn't change interest rates for now, but suggests that the central bank will continue easing next year. They also said they would use government spending to bolster domestic demand and help slumping property markets.
It's just the latest move by the government to revive the world's second-largest economy, which never really got going again after the Covid-19 pandemic. The risk is that the government's future actions don't make enough of an impact to get the country back on track. They have been disappointing before -- the government announced its biggest stimulus since the pandemic right before the Golden Week holiday, but the stock gains fizzled out as consumers remained cautious.
The arrival of Donald Trump in the White House in January adds urgency. Trump has promised to ramp up tariffs on Chinese goods and take other measures to restrict trade, which may mean that even more stimulus is required than previously thought. Chinese officials have been wary in the past of plowing too much extra money into the economy on the worry that that might reignite the speculative property bubble that is still overshadowing the country.
Even though Monday's statement didn't detail specific new measures, it wasn't just Chinese stocks that reacted positively. Oil and prices rose on hopes that demand will strengthen. Luxury goods stocks such as LVMH and Kering, for whom China is a huge market, were also higher.
However, China's onshore indexes didn't do as well. The Shanghai Composite finished little changed, while the CSI 300 lost 0.2%.
The question remains whether China is willing to walk the walk to get the economy back on its feet, rather than just talking the talk.
Write to Brian Swint at brian.swint@barrons.com
This content was created by Barron's, which is operated by Dow Jones & Co. Barron's is published independently from Dow Jones Newswires and The Wall Street Journal.
(END) Dow Jones Newswires
December 09, 2024 06:40 ET (11:40 GMT)
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