China is responding to the slump in its stock markets and the slowdown in the economy with a trickle of stimulus to stabilize, rather than rejuvenate, investor sentiment. The central bank plans to give 10 billion yuan ($1.4 billion) to China Bond Insurance Co. to provide credit support for debt sales by private enterprises
Along with new tools to boost lending to companies, and a deadline for the reduction of barriers to foreign investment, the measures add to steps already taken to secure funding and investment for the economy.
In response, Chinese stocks continued Tuesday’s more than 2 percent slide in early trading Wednesday, signaling that investor worries over the economy haven’t been eased by the policy announcements.
As the trade confrontation with the U.S. hardens into a lasting dampener on the economy, investors have taken an ever-gloomier view on the chances of improvement, making domestic stocks the world’s worst performers this year. Analysts are assuming now that the government will keep adding monetary and fiscal stimulus in limited amounts until sentiment improves, as it is unwilling to renege completely on its goal of reducing dependence on debt.
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“While each of the loosening measures announced recently may only contribute modestly to the overall economy, they are building momentum and changing people’s perceptions about the policy stance,” economists including Song Yu at Beijing Gao Hua Securities Co., Goldman Sachs Group Inc.’s mainland joint-venture partner, wrote in a note. “We expect further loosening measures in the coming days and weeks until the economy and markets show clear evidence of an apparent stabilization.”
