China just went all in on stimulus

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Wow! #China just went all in on #stimulus, sending Chinese stocks 4% higher. China’s central bank:
– Lowered policy #interestrates and signaled more cuts are coming.
– Cut rates on over USD 5 trillion in #mortgages.
– Eased rules for second-home purchases.
– Lowered the required reserve ratio for banks, freeing up fresh #liquidity
– Pledged over USD 100 billion in equity market support.
– Stated policymakers were studying a stock market stabilization fund.

This set of measures is astonishing in itself, but the fact that China opted to announce them all at once is a significant deviation from previous years.

All this means China is (again) unlikely to stay within its budget #deficit target of 3% of GDP and unleashes a massive slew of liquidity that will be felt globally.

This is outright bullish for all risky, liquidity-sensitive asset classes like (quality) #stocks, #gold, and #Bitcoin. If effective, it will also provide upward pressure on #inflation, which has hovered just above zero for months.

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China cuts mortgage rates/Reduces amount of Cash banks hold to recapitalize the big banks in China

Recapitalization process could take several years
As China’s commercial banks prepare for a recapitalization process that could play out over several years, the sector remains under significant pressure.

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The combination of declining profitability, rising bad debt, and economic uncertainty is likely to keep China’s banks on a cautious path as they navigate an increasingly challenging financial landscape.

At the same time, the recapitalization plan underscores the central role that China’s state-owned commercial banks play in the country’s economy.

By injecting fresh capital into these institutions, regulators are signaling their commitment to maintaining stability in the financial system, even as broader economic risks continue to mount.

https://www.nytimes.com/2024/09/24/business/china-cuts-mortgage-rates.html