Market News: China Set to Launch “Aggressive Stimulus”

Should the Chinese government get involved in the country's economy or stay out? Other countries are hoping for major involvement.

In an effort to prevent further deterioration of its economy, the Chinese government is likely to launch an “aggressive stimulus” in the near future, say economists. “All signs point to the fact that the slowdown is not letting up as fast as authorities had expected,” explains Greater China economist Donna Kwok, adding that both “challenging external conditions” and “too effective” tightening last year are to blame for the country’s economic woes[1]. Kwok predicts that more support will be aimed directly at consumers and businesses rather than funneled through banks during this new stimulus move.

While a stimulus may not be the best news for Beijing, rumors of that stimulus have done much to rally European markets. The MSCI All-Country World Index added 0.8 percent yesterday, and U.S. markets rose as well in response to this news and a positive housing report from the National Association of Realtors[2]. “It seems to be a done deal that China will stimulate growth,” said chief economic strategist at Commonfund Michael Strauss. Strauss oversees about $27 billion in assets at the firm and believes that the “refocus back on economic news” is good news for his investors.

Do you think a Chinese stimulus should make anyone feel better?

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