The Hang Seng China Enterprises (^HSCE) Index fell by as much as 2.9% before recovering some of its losses, with property and consumer-related stocks being the most affected. The CSI 300 (000300.SS) Index showed volatility, initially dropping 1.4% but ultimately closing 0.7% higher. A Bloomberg Intelligence index tracking Chinese developer stocks briefly plummeted over 6%.
These mixed responses emerged as investors processed Beijing's recent stimulus package, which alleviated some local government debt but did not provide the extensive fiscal support many had anticipated. The outcome was somewhat underwhelming, especially given the heightened expectations leading up to the meeting. Additionally, Donald Trump's election victory, which may result in increased tariffs on China, has contributed to the uncertainty surrounding the Chinese economy.
Recent economic data released over the weekend heightened calls for Beijing to take more decisive action to stimulate growth. Consumer price inflation remained near zero, and factory-gate prices continued to decline. UBS revised its growth forecast for China in 2025 downward following Trump's election, projecting an expansion of "around 4%" in 2025 and a "considerably lower" rate in 2026.
Nomura Holdings Inc. strategists, led by Chetan Seth, noted in a report that the focus on stabilization rather than stimulus, along with the absence of measures to support bank recapitalization or enhance consumption, is likely to disappoint stock investors, despite the headline debt-swap figures exceeding expectations.
Overseas investors are withdrawing their capital from China as the economic outlook becomes increasingly bleak. In the first nine months of the year, foreign direct investment decreased by nearly $13 billion, indicating that many investors remain skeptical despite Beijing's efforts to implement stimulus measures aimed at stabilizing growth.
Some analysts suggest that China may be conserving its policy options in anticipation of a challenging trade environment following Trump's inauguration. The president-elect has proposed imposing 60% tariffs on Chinese imports. During a briefing after the National People’s Congress Standing Committee meeting, Finance Minister Lan Fo’an assured that a “more forceful” fiscal policy would be introduced next year.
Derek Tay, head of investments at Kamet Capital Partners, noted, “The early morning decline was due to the lackluster stimulus and debt swap proposal, but it also highlighted the authorities' urgent concerns regarding the sluggish economy and the looming threat of potential tariffs. I find the reduction in losses encouraging, as investing is about identifying value amid the chaos. With the recent surge in US risk assets, the valuation gap has become even more attractive.”
On Friday, the State Council, China’s governing body, pledged to enhance financial support for industries to ensure stable growth in foreign trade. Anticipation for new policies may also increase ahead of the Central Economic Work Conference in December, where top leaders will outline economic policy priorities and set targets for GDP growth, fiscal deficits, and inflation for the upcoming year.
Andy Maynard, managing director and head of equities at China Renaissance Securities, expressed on Bloomberg TV that there seems to be a sentiment among Chinese policymakers that they might be holding back, possibly waiting for the Trump administration to take office.