Will China print $283 billion to save the Chinese stock market? Investors await "new stimulus policy" on Saturday

In response to the ongoing economic challenges, China has launched significant monetary easing measures since late last month, including interest rate cuts, reserve requirement reductions, and adjustments to mortgage rates, leading to several days of gains in Chinese stocks. However, the National Development and Reform Commission (NDRC) failed to announce additional fiscal stimulus measures on Tuesday as the market had anticipated, dampening investor confidence and causing a recent downturn in Chinese stocks.

China's major indexes all fell on the 11th

On Saturday at 10 AM, Finance Minister Lan Feng'an is scheduled to hold a press conference to introduce measures aimed at "strengthening counter-cyclical adjustments to fiscal policy." While details have not been disclosed, this has reignited expectations for government intervention to boost the economy.

Previously, the NDRC did not provide specific economic stimulus proposals but reiterated its commitment to achieving a 5% economic growth target for this year, pledging to expedite previously announced support measures, which led to a decrease in market enthusiasm.

Some analysts and investment banks initially expected the NDRC to announce additional fiscal stimulus measures exceeding one trillion yuan. However, these initiatives fall outside its jurisdiction, and the upcoming meeting of the Finance Ministry may serve as a platform for announcing potential stimulus actions.

CreditSights analysts noted that fiscal packages in China are typically designed and announced by the Finance Ministry and approved by the National People's Congress, rather than the NDRC. Therefore, it may be premature to rule out additional fiscal measures, although the scale may again fall short of market expectations.

Market estimates suggest a fiscal stimulus of 2 trillion yuan. According to a Bloomberg survey of 23 economists, analysts, and fund managers, most anticipate that the Finance Ministry will announce an incremental fiscal stimulus of 2 trillion yuan, likely funded through the issuance of special government bonds.

Pushan Dutt, an economics professor at INSEAD, indicated that stimulus measures should be sustained over several years, focusing primarily on households rather than a growth model driven by real estate investment. He emphasized the importance of the targets of the stimulus rather than its scale.

Most respondents believe that if Lan Feng'an does not announce measures on the 12th, new fiscal stimulus will be rolled out within the next six months. They also expect China to issue more government bonds to expand public spending by the end of next year, with the issuance of special government bonds being the most probable option. Four respondents even predicted that the stimulus scale could exceed 3 trillion yuan.

According to the annual budget, China plans to issue nearly 9 trillion yuan in new government bonds this year to help cover the fiscal gap. As any new quota must be approved by the National People's Congress or its Standing Committee, utilizing unused bonds from previous years would not require legislative approval. By the end of last year, central and provincial governments still had about 2 trillion yuan in unused quotas, which could potentially be used to issue bonds to stimulate the economy this year.