China's 75th Anniversary Celebration Boosts Stock Market, But Not Everyone Is Happy

As China marks the 75th anniversary of its founding, the nation finds itself in a precarious economic situation, despite the celebratory mood surrounding this milestone. Since reopening to the world after the Covid-19 pandemic, a sense of gloom has permeated large areas of the country as its economy grapples with significant challenges. Young professionals are struggling to secure jobs, white-collar workers face pay cuts and layoffs, entrepreneurs are having difficulty financing their businesses and managing debts, and middle-class families are witnessing their wealth diminish due to falling housing prices. Meanwhile, affluent individuals are actively seeking ways to move their money abroad.

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This economic malaise has led to the emergence of a new phrase resonating among the populace: "the garbage time of history." This term encapsulates the sentiment that China is stuck in a bleak period, reminiscent of the final minutes of a lopsided basketball game where one team feels hopelessly behind. The atmosphere is starkly different from the optimism that permeated the country just five years ago during the last major National Day celebrations in 2019, when discussions centered around the potential for China to surpass the United States as the world’s largest economy. Nowadays, conversations have shifted to how the Chinese government can avoid a scenario akin to Japan's "lost decade," which followed the bursting of its housing bubble in the 1990s.

In response to mounting economic concerns and disheartening data, Chinese leader Xi Jinping recently approved a stimulus package aimed at restoring confidence in the world’s second-largest economy. Following this, the People’s Bank of China introduced a series of measures to combat deflation, which included encouraging commercial banks to increase lending and lowering borrowing costs for households and businesses.

To bolster public morale further, officials announced cash handouts for disadvantaged citizens and subsidies for recent graduates facing a challenging job market. Additionally, the ruling Communist Party’s Politburo dedicated its September meeting to addressing economic issues—a break from tradition. High-ranking officials acknowledged that “new situations and problems” have emerged and called for urgent action to stimulate fiscal spending, stabilize the property market, and improve job opportunities for both fresh graduates and migrant workers.

Economists, such as Xu Tianchen from the Economist Intelligence Unit, noted that the simultaneous implementation of multiple measures underscored the urgency for policymakers to stabilize the economy. This flurry of policy announcements has provided a much-needed boost to China's beleaguered stock market just before the upcoming week-long national holiday. Chinese blue-chip stocks surged over 15% in the last week, marking the largest single-week gain in nearly 16 years, while Hong Kong's Hang Seng index experienced a 13% rise, its best week since 1998.

The momentum continued into Monday, with the combined turnover on the Shanghai and Shenzhen stock exchanges exceeding 1.8 trillion yuan (approximately $228 billion), setting a record high. This surge occurred despite a key indicator of factory activity, the official purchasing managers' index (PMI), contracting for another month in September, reflecting ongoing struggles in the manufacturing sector.

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