After facing economic woes and pandemic-related challenges, the Hang Seng Index in Hong Kong experienced a significant turnaround in late September following China's announcement of measures to support its struggling economy. The index has surged more than 18%, marking its largest two-week gain in nearly two decades.
The focus of the stimulus measures has primarily been on monetary policy adjustments, including interest rate cuts and reductions in reserve requirements for banks. However, economists are urging for more substantial fiscal policies to be implemented to boost consumer confidence and drive economic growth.
Experts believe that China's leadership is poised to take further action, with expectations of a significant fiscal spending package to stimulate the economy. Plans include issuing special sovereign bonds worth approximately 2 trillion yuan for consumer subsidies and infrastructure projects.
Some economists are advocating for even bolder measures, suggesting the issuance of up to 10 trillion yuan in long-term government bonds to fund critical infrastructure projects. They draw parallels to China's response to the 2008 financial crisis, where a four trillion yuan fiscal package helped mitigate the impact.
Analysts predict that a substantial fiscal package could add a full percentage point to economic growth, but caution that addressing oversupply in the property market remains a crucial challenge. Despite the recent rally in Chinese stocks and positive market sentiment, sustained efforts are needed to ensure a robust recovery in both the economy and asset markets.
