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China Announces Comprehensive Policy Package to Stabilize Economy and Engage in Talks

China has introduced a series of targeted economic support policies aimed at mitigating trade pressures and stimulating growth:

- Support for Tariff-Affected Firms: New policies will assist businesses impacted by trade restrictions.

- SME & Private Sector Financing: A dedicated financing framework will improve credit access for small and medium-sized enterprises (SMEs) and private companies.

- Capital Market Stabilization: Insurance companies’ equity investment risk thresholds will be lowered to bolster market confidence.

- Property Market Financing Reforms: A revised credit system will better align with the real estate sector's needs.

Monetary Policy Easing

The People’s Bank of China (PBOC) has rolled out stimulus measures:

- Reserve Requirement Ratio (RRR) cut by 50 bps, injecting liquidity into the banking system.

- Auto finance reserve ratio slashed from 5% to 0% temporarily.

- Policy rates reduced by 10 bps, with structural lending rates cut by 25 bps.

- Housing provident fund loan rates lowered by 25 bps to support homebuyers.

- RMB 300B in relending quotas allocated for tech innovation and industrial upgrades.

- RMB 500B in new lending facilities for elderly care and service consumption sectors.

- Capital market support tools expanded to RMB 800B, with a new risk-sharing mechanism for tech innovation bonds.

Diplomatic Developments

- Vice Premier He Lifeng, China’s top trade negotiator, will visit Switzerland (May 9–12) for talks with U.S. Treasury Secretary Bessent.

The Ministry of Commerce confirmed China’s conditional willingness to engage with the U.S., citing global economic stability and domestic industry interests as reasons.

HKD Strengthens: Can China Stocks' Rally Continue?

On May 7, the Governor of the People's Bank of China, Pan Gongsheng, announced a 0.5 percentage point RRR cut, injecting approximately 1 trillion yuan of long-term liquidity into the market. A package of policies to support financing for SMEs will be launched soon. Chinese assets surged in response to these favorable policies. Some believe that Chinese concept stocks are still at low levels, as major tech stocks remain undervalued. Are you bullish on China stocks continued rally? Are they still undervalued or not? How will stronger HKD affect HK stock market?

Disclaimer: Investing carries risk. This is not financial advice. The above content should not be regarded as an offer, recommendation, or solicitation on acquiring or disposing of any financial products, any associated discussions, comments, or posts by author or other users should not be considered as such either. It is solely for general information purpose only, which does not consider your own investment objectives, financial situations or needs. TTM assumes no responsibility or warranty for the accuracy and completeness of the information, investors should do their own research and may seek professional advice before investing.

Comments

AlvinBell
05-07
AlvinBell
Great analysis

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Monetary Policy Easing The People’s Bank of China (PBOC) has rolled out stimulus measures: - Reserve Requirement Ratio (RRR) cut by 50 bps, injecting liquidity into the banking system. - Auto finance reserve ratio slashed from 5% to 0% temporarily. - Policy rates reduced by 10 bps, with structural lending rates cut by 25 bps. - Housing provident fund loan rates lowered by 25 bps to support homebuyers. - RMB 300B in relending quotas allocated for tech innovation and industrial upgrades. - RMB 500B in new lending facilities for elderly care and service consumption sectors. - Capital market support tools expanded to RMB 800B, with a new risk-sharing mechanism for tech innovation bonds. Diplomatic Developments - Vice Premier He Lifeng, China’s top trade negotiator, will visit Switzerland (May 9–12) for talks with U.S. Treasury Secretary Bessent. 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