Chatter increased on Monday regarding possible economic stimulus measures from China's government. Expectations of big stimulus measures out of Beijing have produced a string of disappointments since early 2023. But Chinese economic data has turned so weak that this time will likely be different, according to a leading skeptic of China's economic stewardship. The copper price, copper miners Teck Resources and Freeport-McMoRan, and Chinese e-commerce giant Alibaba continued their latest rally bids in Monday morning stock market action.
China's Tea Leaves Point To Stimulus
In a Monday report from Reuters, an unnamed policy adviser to Beijing said the Chinese government may raise the limit on the amount of bonds approved for issuance this year, which would widen the deficit.
Reuters also cited a recent report in the government-run China Daily that Beijing "should consider additional direct support to consumers worth at least 1 trillion yuan ($139 billion) — either cash or vouchers."
Growing anticipation of meaningful stimulus follows a series of weak data points. China retail sales rose just 2.2% from a year ago in July, even as industrial output grew 5.1%.
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Weak Chinese Data
"The excess production is getting exported, which has other countries protesting that China is dumping goods in global markets and exporting deflation," wrote investment strategist Ed Yardeni in an Aug. 15 note.
Meanwhile, China's new home prices fell 0.7% in July. That brought the 12-month change to -5%, the worst in nine years, Yardeni added.
"July data suggest the government will have to provide more stimulus to meet its 5% economic growth target for the year," he wrote. "Most striking is the small but unusual decline in bank loans during the month."
Chinese Consumers Need A Lift
Michael Pettis, senior fellow at the Carnegie Endowment, has been warning for nearly a decade that China's economy was headed for trouble. He sees a big consumer-focused stimulus as unavoidable.
"The declining efficiency of further investment in property, infrastructure and manufacturing" requires that Beijing unleash a demand-side fiscal boost to meet its 5% GDP growth target, Pettis wrote in a post on X.
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Markets React: Copper Price, Teck, BABA
CME Group futures show copper's price up 1.1% to $4.19 a pound, extending its recovery after falling below $4 early this month. Teck Resources rose 1.25% to 49.36 as it extended last week's rally past its 50-day moving average. FCX rose 1.7%.
Among leading Chinese stocks, BABA climbed 1.5%. Chinese retailer PDD Holdings, part of the IBD 50 list of leading growth stocks, rose 0.6%. Li Auto rose 4.6%.
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