(Bloomberg) — Chinese stocks declined after a high-profile legislative meeting let down investors who had been hoping for large-scale stimulus to revive domestic demand and combat deflation.
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The CSI 300 Index was down 0.7% as of 10:53 a.m. local time, with sub-gauges of consumer staples and energy shares falling the most. The Hang Seng China Enterprises Index fell more than 2% as only five stocks in the fifty-member gauge advanced. A Bloomberg Intelligence gauge of Chinese developer shares tumbled more than 6%.
The retreat underscores investors’ disappointment after Beijing unveiled a 10 trillion yuan ($1.4 trillion) program to tackle local government debt, but stopped short of providing new stimulus to bolster consumption. The results proved somewhat anti-climactic given the heightened policy expectation ahead of the gathering, especially with Donald Trump’s presidential victory injecting fresh uncertainty over China’s economic path.
Chinese data released over the weekend highlighted the urgency for more pro-growth efforts. Consumer price growth remained close to zero and factory-gate prices continued to fall. UBS lowered its 2025 growth forecast for China following Trump’s election, expecting an “around 4%” expansion for 2025, and a “considerably lower” pace in 2026.
“With perceived emphasis on stabilization rather than stimulus, and no measures to facilitate bank recapitalization and/or boost consumption, we think this will come as a disappointment for stock investors, even though the headline debt-swap numbers were ahead of expectations,” Nomura Holdings Inc. strategists led by Chetan Seth wrote in a note.
Overseas companies are also pulling their money out of China as the growth outlook turns gloomier. Foreign direct investment slid almost $13 billion in the first nine months of the year, a sign that some investors are still pessimistic even as Beijing rolls out stimulus measures aimed at stabilizing growth.
Some market watchers say China is likely preserving policy room to prepare for an unfavorable trade environment once Trump takes office in 2025. The US president-elect has threatened 60% tariffs on Chinese goods. At a Friday briefing following the Standing Committee meeting of the National People’s Congress, Finance Minister Lan Fo’an promised “more forceful” fiscal policy next year.
