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.
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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.
Fashioning a strong stock market is important. But it may just mark the end of the beginning of reinvigorating China’s $19 trillion economy.
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Editing by Antony Currie; Production by Aditya Srivastav
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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.