The Buzz

All markets and investing news all the time

Markets shrug off China stimulus

April 2, 2014: 11:16 PM ET

Worrying economic data out of China had raised expectations in recent weeks that Beijing would respond with stimulus measures in an effort to stabilize growth.

The State Council obliged late Wednesday, announcing a slate of new measures including railway and urban redevelopment projects, along with a tax break for small businesses.

Market reaction on Thursday was muted. After an initial boost, the Shanghai Composite ended the day in negative territory. Hong Kong's Hang Seng was little changed.

There are a few likely explanations for the collective shrug from investors.

The new package is relatively small compared to many of Beijing's previous stimulus efforts. In response to the 2008 financial crisis, for example, China pumped almost $600 billion into the economy.

In addition, markets have likely priced in much of the stimulus impact. Railway projects are an old standby for Beijing, and something investors would have anticipated.

Related: Risks in focus on China's economy slows

Most economists think that after slower expansion in the first two quarters of 2014, China's economy will improve in the second half of the year. Beijing has set a full-year GDP growth target of 7.5%, although the leadership has indicated that it would also tolerate a slightly weaker performance.

If this stimulus package doesn't do the trick, HSBC economists said that China has plenty of other stimulus options it could pursue.

"We think Beijing still has other options in their toolkit, such as ... lowering the entry-barriers in various sectors, spending or incentives for environmental-protection, as well as more urban infrastructure," the economists wrote Thursday in a research note.

Posted in: , ,
Join the Conversation
Fear & Greed
Sponsored by
About This Author
Charles Riley
Charles Riley
Reporter, CNNMoney

Charles Riley lives and works in Hong Kong, where he covers markets, economics and other high-impact stories across Asia. He previously worked for CNNMoney in New York and CNN in Washington. He tweets @CRrileyCNN

To view my watchlist

Not a member yet?

Sign up now for a free account
Stupid Stock Move of the Day
#StupidStock Move of the Day! Yes, Urban Outfitters may be finally turnings things around. But $URBN up 17%? Seems a bit excessive, no?
Most Popular
Powered by VIP.