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China Equity Markets Another Potential Trigger for Consumer Spending
Monday’s housing sector policy adjustments boosted investor sentiment, another crucial piece of the jigsaw puzzle.
Leading economist Hao Hong recently remarked on the potential effect of a Mainland China equity market recovery on consumer sentiment, stating:
“There is no quick fix to boosting household confidence except for a stock market rebound. This is a topic that we economists have been discussing in the closed door meetings in Beijing.”
On Monday, August 25, the CSI 300 extended its winning streak, rising to a three-year high. Meanwhile, the Shanghai Composite Index soared to a 10-year high, potentially boosting consumer sentiment. However, Hao Hong warned retail participation is measured, contrasting with last September’s rally.
Nevertheless, Beijing’s efforts to bolster the housing sector and the broader economy could drive retail participation.
CN Wire reported:
“Analysts say the absence of retail euphoria in China’s stock rally may give the market greater sustainability, even as the Shanghai Composite hit a decade high. The CSI 300 Index’s 10-day volatility remains near this year’s lows, suggesting measured positioning by investors, unlike past policy-driven surges.”
Hopes of Fresh Policy Measures Key to Mainland Stock Market Rallies
Beijing’s latest housing sector policy adjustments aligned with market expectations of a ramp-up of government policy support, lifting Mainland-listed stocks.
Last week, China’s premier Li Qiang pledged to boost spending, stabilize the housing market, and address labor market strains. Beyond the housing sector, unemployment remains a key concern. Youth unemployment rose from 14.5% in June to 17.8% in July, the highest in 11 months. The national unemployment rate sits at 5.2%.
Economists Expect More Policy Support as China’s Economy Loses Momentum
Natixis Asia Pacific Chief Economist Alicia Garcia Herrero recently remarked on the need for more government support, stating:
“China can reach its 2025 growth target but with even more stimulus and the second half will be tougher. All in all, while the Chinese economy has a greater likelihood of meeting the government’s growth target, there are significant uncertainties down the road. Despite foreseeable headwinds from trade friction and persisting deflation, the government does have more bullets for further stimulus if needed.”
The Kobeissi Letter remarked on China’s economy, underscoring the pressing need for policy support, stating:
“China’s economy is slowing. Fixed-asset investment growth in the first 7 months of 2025 slowed to +1.6%, the weakest in over 5 years. Property investment declined -12.0%, the largest drop since the 2020 pandemic low. Retail sales grew +3.7% in July, down from +4.8% in June, marking the slowest pace this year. Industrial production also slowed, rising +5.7% in July compared with +6.8% in June, the slowest rate since November.”
Credit demand also deteriorated, highlighting Beijing’s challenge to revive consumption, and noting:
“Growth in Yuan-denominated new loans contracted for the first time in 20 years in July.”
Mainland Stock Markets Reach Highs on Stimulus Bets
On Tuesday, August 26, Mainland China’s CSI 300 and the Shanghai Composite Index fell 0.30% and 0.18%, respectively, putting a four-day winning streak at risk. Despite the morning session losses, the indexes remain close to the previous session’s highs.
Despite hitting multi-year highs, both indexes trade well below their all-time peaks, signaling potential room for an extended bull run.
- CSI 300: +9.41% in August, +13.25% YTD.
- Shanghai Composite: +8.47% in August, +15.62% YTD.
- Hang Seng Index: +28.6% YTD, outperforming both Mainland equity markets and the Nasdaq (+11.07% YTD).
Trade headlines and Beijing’s next stimulus measures remain key. However, an escalation in US-China trade tensions and delays in policy support could derail the rally.
