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On the performance of the Chinese stock market over the past year and a half, the chief economist for China at a Japanese securities firm awarded it a perfect score.
“The most effective measure China took during this period was to stimulate the stock market, which led to rising share prices across most companies,” he said at a recent media event hosted by the firm.
During this rally, he believes the country’s economic and market policies have been well-balanced. “So far, financial regulators have performed exceptionally well, implementing daring strategies while exercising caution to maintain stability in the market.”
In response to recent moves by China’s three major stock exchanges to raise the minimum margin requirement for leveraged trading to help cool the market, he noted that a key goal of this upward trend is to prevent a “rampant bull run” similar to the one in 2015, which was followed by a significant crash.
Since last July or August, the overall policy environment has remained relatively cautious and stable.
He recommended that China continue implementing measures to prevent overheating in the market, as regulators need to avoid disconnection between stock performance and actual economic fundamentals.
If future policies prove effective, economic data in the latter half of the year are expected to continue improving. Given the low baseline from the previous year, there’s a high likelihood that this year’s economic growth will start off slower and accelerate later, he said.
He also mentioned the possibility of a 0.1 percentage point decrease in the benchmark interest rate in the second quarter. “However, considering that interest rates in China are already quite low compared to global levels, the positive impact of a rate cut on the economy might be limited.”
This year’s macroeconomic strategy will primarily focus on fiscal policies, with structural monetary measures serving as supplementary tools, he added.
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