SwedCham China Insights for week September 23 – September 29

SwedCham China Insights for September 23 – September 29

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Top news of the week:

China-U.S. economic working group holds fifth meeting in Beijing

23 September 2024

The fifth meeting of the China-U.S. economic working group was held in Beijing from September 19 to 20. The Chinese side expressed serious concerns about the U.S. tariffs on China, restrictions on investment in China, sanctions related to Russia and actions affecting Chinese companies' interests. Both sides agreed to maintain communication.

Hong Kong stock exchange remains open during bad weather

24 September 2024

On September 23, the Hong Kong Exchanges and Clearing Limited (HKEX) implemented a new arrangement that allows the Hong Kong stock market to operate despite severe weather.

China opposes U.S. proposed regulations on connected vehicles

25 September 2024

China's Commerce Ministry expressed strong opposition to proposed U.S. regulations about restricting the use of connected vehicles from China. The regulations, proposed on September 23, also limit the use of software and hardware related to connected vehicle technology.

China's non-financial ODI up 12.4 pct in first eight months

26 September 2024

China's non-financial outbound direct investment (ODI) increased 12.4% year on year to 94.09 billion U.S. dollars in the first eight months of the year, data from the Ministry of Commerce showed.

China to implement visa-free policy for Denmark

27 September 2024

China is to implement a visa-free policy for Danish citizens, Chinese Foreign Minister Wang Yi said on September 27.

Wang Yi Meets with U.S. Secretary of State Antony Blinken

29 September 2024

On September 27 local time, Minister of Foreign Affairs Wang Yi met with U.S. Secretary of State Antony Blinken upon request on the sidelines of the United Nations General Assembly in New York.

Insight of the week:

In the past week, China’s financial regulators announced a wide range of measures to support the economy, aimed at boosting liquidity and lowering borrowing costs for individuals and companies alike. This comes as protracted deflationary pressures weigh on the world’s second-largest economy.

The measures included cuts to a key policy interest rate and existing mortgage rates, reductions to banks’ cash reserve requirements, lower down payments for second homes and more liquidity for the stock market. They were announced on September 24 at a press conference in Beijing by central bank chief Pan Gongsheng, alongside the heads of the National Administration of Financial Regulation and the China Securities Regulatory Commission.

Pan said the reserve requirement ratio would drop 0.5 percentage point in the near future. This would make available an additional one trillion yuan for lending. People’s Bank of China (PBOC), the central bank, would also cut a key short-term policy rate, known as the seven-day reverse repo rate, by 0.2 percentage point, aimed at guiding interest rates on loans and deposits downwards. On September 27, PBOC reduced the standing lending facility (SLF) interest rates by 20 basis points from the July levels. Also on the same day, the PBOC cut the reserve requirement ratio for financial institutions by 0.5 percentage points and lowered the seven-day reverse repo interest rate by 20 basis points.

On the property front, the central bank would guide interest rate cuts on existing mortgages by half a percentage point on average. The move is expected to benefit 150 million people nationwide and reduce the average annual household interest bill by about 150 billion yuan. Second-time home buyers will see the minimum down payment ratio reduced to 15%, down from 25% – as is the case for first timers.

To boost the capital market, the central bank will set up a 500 billion yuan swap facility that allows eligible institutions to pledge assets in exchange for liquidity to buy stocks. Separately, a 300 billion yuan refinancing facility will encourage banks to provide loans to listed companies and major shareholders to buy back or increase their stakes.

China’s top leaders convened a Politburo meeting on September 26, focusing on economic policy. The meeting signals a shift in approach. On monetary policy, the leaders no longer used the phrase “prudent and precise” as in the July meeting. Decisions were made to strengthen countercyclical adjustments in fiscal and monetary policies, ensure necessary fiscal expenditures, and implement impactful interest rate cuts. The meeting also addressed stabilizing the housing market and “stopping it from further declining”. The meeting called for efforts to boost the capital market, vigorously guide medium- and long-term funds to enter the capital market and clear the obstacles for social security, insurance, and wealth management funds to invest in the capital market. Mergers, acquisitions and restructuring of the listed firms will be supported, the meeting noted.

Chinese equities surged to their best week since 2008 after Beijing launched the economic stimulus package to boost the stock market. The CSI 300 index closed up 4.5% on September 27 while Hong Kong’s Hang Seng index rose 3.6%, up 13% since the start of the week in its biggest weekly gain since October 1998 during the Asian financial crisis. By the close of trading on September 27, the Shanghai Composite Index rose by 2.88%, finishing at 3,087.53 points. The Shenzhen Component Index surged by 6.71%, closing at 9,514.86 points, while the ChiNext Index saw a remarkable 10% surge, marking its largest single-day gain in history, ending at 1,885.49 points. From September 23 to September 27, the Shanghai Composite Index gained 12.81% for the week, its biggest single-week increase since November 2008. The Shenzhen Component Index soared 17.83% this week, the largest weekly gain since April 1996. ChiNext Index rose 22.71%, the highest single-week increase in its history. As of the close of trading on September 27, the total market value of A shares reached approximately 77.42 trillion yuan, with a weekly increase of 9.6 trillion yuan.