Market Continues To Be Suspicious Of China Stimulus

When it comes to economic stimulus, China is damned if it does and damned if it doesn’t.

The market loves stimulus: governments throwing money at infrastructure projects that require labor and steel and copper and cement, or central banks propping up securities markets. But when it comes to China, that kind of stimulus is deemed unsustainable by Xi Jinping himself. Not only does it come with provincial governments funding businesses that lead to oversupply—be it in housing or solar panels—it also sends a signal to the market that China’s economy is weaker that Beijing is letting on.

China has been providing stimulus to the economy for months now. The People’s Bank of China is buying stocks and allowing government banks to lend more money. Yet, China’s A-shares are down again on Thursday. There’s no signal of a trend upwards, even though the A-share market has outperformed the MSCI Emerging Markets and the S&P 500 so far this month.

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