On Wednesday, a senior Chinese economic official stepped in to reassure investors, saying Beijing would take action to support the economy and financial markets after a sharp sell-off accelerated by Russia’s invasion of Ukraine.
Liu He, vice premier and closest economic adviser to President Xi Jinping, said the government will take measures to “stimulate the economy in the first quarter” and introduce “market-friendly policies.” He did not specify what measures would be taken.
Liu made the comments after convening a special meeting of the State Council Committee on Financial Stability and Development, which he chairs, according to a summary of the meeting released by China’s official Xinhua news agency. The FSDC oversees the country’s major financial regulators, including the central bank and securities regulator, and holds regular meetings, but such a wide-ranging confidence-boosting statement is rare.
Investors in Shanghai, Shenzhen and Hong Kong, as well as in US-listed Chinese companies, have been spooked by the economic slowdown, the inflationary fallout from the war in Ukraine, and the Xi Jinping administration’s prolonged crackdown on previously fast-growing companies in China. technology, education and real estate sectors.
Beijing has also suspended plans to expand property tax trials announced late last year, Xinhua reported separately citing the finance ministry, to ease pressure on the highly indebted real estate sector.
The meeting, led by Liu, addressed a wide range of issues that added to the uncertainty about China’s economy. Beijing should speed up and quickly complete the fixing of the country’s major technology platforms while ensuring transparency and policy clarity, the summary of the Xinhua meeting said.
Chinese stocks rose on Wednesday, with Hong Kong’s underlying Hang Seng posting its best day since 2008 after rising more than 9.1% to hit a six-year low the day before.
The Hang Seng Tech index jumped 22.2% after the meeting, while shares of Alibaba and Tencent, China’s two largest internet groups, rose 27.3% and 23.2%, respectively.
The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, closed 4.3% higher after falling more than 13% following Russia’s invasion of Ukraine on Feb. 24.
Larry Hu, Macquarie’s chief China economist, said Liu sent a strong signal, “suggesting policymakers are deeply concerned about the recent market crash.”
Ming Liao of Prospect Avenue Capital said, “Due to the sell-off in the market and the poor economic situation, they have decided to take action.”
He added: “They have made it clear that China will address the delisting of tech companies in the US, but I don’t think the regulation of platform companies will stop completely. It may be more subtle in the future.”
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The planned delisting of Chinese companies in New York over access to audit records has also weighed heavily on their stocks, with the sell-off accelerating after the US Securities and Exchange Commission named the first of 270 groups to be targeted if they are. will do. do not submit audit documents.
The FSDC said it has made progress on this with the SEC and they are working on a plan to resolve the standoff.
“The Chinese government supports the listing of companies from various industries overseas,” the meeting report said.
The committee also urged regulators to pursue policies that benefit the economy and be wary of policies that discourage growth.
“Any policy that will have an impact on financial markets must first be agreed with financial regulators,” the committee said.
Additional reports by Sun Yu and Edward White