Can China turn its bold stimulus measures into a sustainable recovery?

Chinese shares rose as investors reacted positively to the government’s massive efforts to revive the country’s struggling economy. Haining Zha, vice president and director, asset allocation at TD Asset Management, talks to MoneyTalk’s Kim Parlee about why these measures may be different from previous stimulus efforts and the potential market implications.

Transcription

Kim Parlee – Chinese shares have rallied in recent days, including a session earlier this week in which they posted their biggest one-day gains in 16 years. Investors are reacting to the government’s unveiling of a series of bold stimulus measures to tackle several economic challenges, including a struggling labor market, a housing crisis and weak consumer demand. My next guest describes these latest efforts as unprecedented. Haining Zha is vice president and director of asset allocation at TD Asset Management and joins me now. Thank you so much for coming in.

Haining Zha – Thank you for having me.

Kim Parlee – It was extraordinary what happened in the market. And I know another commentator I was listening to talked about the entire Chinese recession being wiped out in five days on the market.

Haining Zha – That’s exactly what happened. It is extremely unusual. But if you think about why they do it now, they have every reason to do it. Strange things are happening. So if you look at, say, M1, over the last 20, 25 years, it’s never been negative. And at the beginning of this year, we have negative print, which has never happened before. And another data point, if you look at the mortgage, it never happened that the household actually paid off the mortgage. Mortgage credit is actually going down and going up at a negative rate. So these are some of the strange things happening that have policymakers on high alert.