Beijing’s recent stimulus package announcement failed to live up to the market’s expectations, leading to a significant drop in Chinese stock indexes. The measures announced by the economic planning agency were seen as an anticlimax, as the anticipated trillions of yuan in investment never materialized.
The slump in the Chinese markets comes against a backdrop of economic challenges, including the lingering effects of the COVID-19 pandemic, high inflation, and a sluggish property market. Youth unemployment has reached a record high of 18.8%, and Beijing may even miss its annual growth target of 5%, a figure it often surpassed before the pandemic.
Despite the government’s confidence in meeting its economic targets, as expressed by President Xi Jinping, the markets and the public seem less convinced. Analysts suggest that Beijing is signaling more stimulus ahead, but it will be measured and phased. The collapse of China’s real estate sector in 2021 has made the government cautious, as the wipeout was brutal for ordinary homebuyers. Additionally, China’s economic sluggishness comes at a time when it finds itself in a fierce rivalry with the U.S. and its allies, further complicating the situation.
While the stock market turmoil may not significantly impact ordinary Chinese citizens, who tend to prefer saving over investing in the stock market, the government’s actions to boost the economy, such as rate cuts and measures to revive the private sector, are likely to have a more direct impact on the lives of regular citizens.
