Although the trade war with the United States remains unresolved — and could even escalate after Chinese regulators accused Nvidia of violating antitrust rules — the CSI 300 index has continued its upward trajectory. However, this rally is not solely driven by artificial intelligence, as is largely the case with the S&P 500 index.
In fact, China’s domestic policies to strengthen its IT infrastructure have funneled money into large local technology companies, turning many of them into top stock gainers. Alibaba’s announcement of a massive $53 billion investment in AI infrastructure further fueled the momentum, demonstrating a long-term commitment to technological self-sufficiency.
Beyond technology, investors are betting on broader government measures to address local government debt and real estate debt issues, as well as stimulate the economy overall. And these expectations gained traction following the release of the latest economic data from Beijing this morning.
In short, the August numbers were weak across the board. Industrial production rose 5.2% compared to last year, a bit below July’s 5.7%. Retail sales lost momentum, slowing to 3.4%, the lowest reading since November. Fixed asset investment was almost flat, up just 0.5%, and the property sector took a steep hit, dropping 12.9%.
This makes it harder for Beijing to hit its official 5% growth target.
The case for more stimulus is growing, especially with inflation showing further signs of weakness. In August, consumer prices fell 0.4% from a year earlier after staying flat in July, which was worse than expected. Producer prices were also down 2.9% year-on-year, though the decline was smaller than July’s 3.6% drop.
With that in mind, attention is shifting to October’s Fourth Plenary Session. That’s when the next Five-Year Plan will be discussed in depth before it’s formally presented at next year’s Two Sessions. Even if there’s no big policy announcement, the meeting could offer clues or adjustments that help shape the economy’s direction.
This content is for informational purposes only and does not constitute financial, investment, or other professional advice. It should not be considered a recommendation to buy or sell any securities or financial instruments. All investments involve risk, including the potential loss of principal. Past performance is not indicative of future results. You should conduct your own research and consult with a qualified financial advisor before making any investment decisions.
Leave a Reply