Asian stocks surge and then pare gains as China’s hotly-anticipated economic growth measures fail to deliver

China said it was confident in reaching its economic targets this year and promised to further support growth, although it held back in unleashing more major stimulus in a disappointment to investors looking for more fuel for a world-beating stock rally. Officials in the National Development and Reform Commission, the country’s economic planning agency, said on Tuesday they would speed up spending while largely reiterating plans to boost investment and increase direct support for low-income groups and new graduates. They added that China would continue to issue ultra-long sovereign bonds next year to support major projects and bring forward a 100 billion yuan ($20.8 billion) investment in key strategic areas originally budgeted for 2025 to this year. “We are fully confident in achieving the annual economic and social development targets,” Zheng Shanjie, the NDRC’s chairman, told reporters in the Government’s first press briefing following a week-long national holiday. He noted that China was facing a more complex environment at home and abroad. A rally in onshore Chinese stocks on their return from a week-long holiday fizzled quickly as traders questioned Beijing’s resolve to add more stimulus. In the end, the CSI 300 Index finished just 5.9 per cent higher. In Hong Kong, a gauge of Chinese shares was down more than 10 per cent, on course to erase almost all of the gains made while onshore markets were shut for the Golden Week. The CSI 300 Index had risen for nine straight sessions through September 30 before the Golden Week break, boosted by a stimulus blitz that included interest-rate cuts, freeing-up of cash for banks and support for stocks. That saw Wall Street heavyweights including Goldman Sachs, HSBC, and BlackRock upgrading the once-beaten down stock market amid bets of further stimulus. “Nothing much is new compared to the previous announcements, and the latest commitment to fiscal stimulus looks weaker than market expectations,” said Gary Ng, senior economist at Natixis SA. “The front-loading of fiscal spending will only help stabilise growth and will not be enough to engineer a sharper rebound.” The press briefing was closely watched for further steps to lift the economy after Chinese leaders signalled a desire to draw a line under the nation’s growth slump. The barrage of measures raised expectations for additional fiscal stimulus worth trillions of yuan to boost confidence, although scepticism lingers over whether they could sustain growth. The authorities will introduce “as soon as possible” specific measures to expand the areas allowed to receive funding support from the sales of special local government bonds, Zheng said. Some economists have called on policymakers to permit the bond funds to be used to finance local governments’ purchases of unsold homes from developers to reverse a deepening housing slump. The agency will also urge local officials to issue the remainder of this year’s new special bonds — worth about 290 billion yuan — by the end of this month, Liu Sushe, a vice-chairman of the NDRC, said at the same briefing. In 2023, China ordered provinces to use up the year’s special local bond quota before adding 1 trillion yuan of sovereign bonds in late October to stimulate the economy. The NDRC previously earmarked 300 billion yuan raised from selling ultra-long special sovereign bonds this year for an initiative to subsidise purchases of new industrial equipment, home appliances and cars. It also vowed to speed up urbanisation in efforts that would boost demand for property and consumption in cities. Before the briefing, Morgan Stanley analysts including Laura Wang said the agency might unveil a 2 trillion yuan fiscal package, including support for local government financing, infrastructure investment and a modest consumption boost. Citigroup expected the fiscal package to amount to 3 trillion yuan, with funds potentially marked also for welfare spending and bank recapitalisation. The Ministry of Finance, typically responsible for issuing sovereign debt, has yet to make an announcement on any new policy since the Chinese central bank started a series of stimulus package late last month. China’s leaders aim to achieve about 5 per cent growth this year, but economic data in recent months show that would be hard to reach as consumer spending remained sluggish and a property downturn persisted. Rising trade tensions are also threatening new growth drivers such as exports of electric vehicles. The NDRC is the latest government body to unveil measures to boost an economy on the brink of a deflationary spiral. Just before the Golden Week holiday, the Government unleashed a slew of stimulus measures including interest rate cuts, more liquidity to promote bank lending and a pledge of as much as $US340b to support the stock market. The National Day holiday offered tentative signs of a pick-up in consumer sentiment, with preliminary figures showing domestic trips exceeding last year’s levels and home sales jumping in major cities. Bloomberg.