Chinese govt. prioritizing industrial system in 2024 policy

Chinese economic leaders released their plan for 2024 naming industrial policy as their top priority, much to the dismay of investors who wished to see a stimulus to boost overall growth. In turn, many Chinese stocks began to trend downward after the announcement.

Yahoo Finance Markets Reporter Jared Blikre joins the Live show to break down China’s most recent economic data points and how China-based stocks are reacting.

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live.

Video Transcript

BRAD SMITH: Stocks in China taking a hit this morning after leader’s economic roadmap for 2024 failed to excite investors. Chinese officials named industrial policy a top priority for the new year. And failed to announce any large scale stimulus or extra efforts to mend the faltering property sector.

With more on the markets and the reaction we’re seeing– and joined now by Jared Blikre. Hey, Jared.

JARED BLIKRE: Thank you, Brad. A little bit of disappointment here. There weren’t high expectations. But there was really nothing to address the property sector problems that China has had. This was a meeting of the Communist Party’s economic– and this is an annual event, economic work conference. And they put out a few objectives. They want to build an industrial system. That’s a quote. 2023 was the year of opening up, reopening up, and also stimulating demand.

But next year is going to be focused on industrial and building up that sector. Let me go to the YFi Interactive. I have a couple of charts here. The first is Chinese GDP. This goes all the way back to 1992, so 30 years. You can see some volatility here around the pandemic. But it is now around 4.9%.

Worthwhile noting that only a week or two ago, Moody’s downgraded the outlook, not the debt, but the outlook for China’s debt. And it was based in part on unrealistic growth expectations. They’re looking for growth of maybe 3% over this year, and the next year. And then 2.8% after that. But it’s been difficult for China to stimulate demand because they don’t want to devalue their currency. And yet, that’s kind of what the nature of printing money is about.

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So they’re trying to do it very targeted like and not do any blanket stimulus. Here’s another chart. This is China, their budget deficit relative to GDP. This goes back a decade. And you can see, it is at the highest amount. And the reason it’s notable, it is above 3%. It was thought that 3% was a ceiling before. But now, China has uncorked that bottle. And they are experimenting with higher debt. And all of this has a feedback loop into their currency and also the stocks.

And let me just show you what’s happening pre-market. The background colors here, where you see the green and the red. That’s yesterday’s price action. But these little rectangles like, Pinduoduo, you can see that’s up or– down 83 basis points in the pre-market. Alibaba down 7/10 of a percent.

And let me just show you what’s happened year-to-date in these issues. I’m going to pull up the pre-market quotes. You can see very much a bifurcated market. You have big winners, big losers. Pinduoduo up 80%. Alibaba down 19%. And over the last month, I think this is notable, when in the US and the rest of the world has been screaming higher, we’ve seen mainly negative price action in China. So China is just decoupled from the rest of the world. Although, that’s not a new event. And the latest measures from the Communist Party, certainly, not doing anything to stimulate excitement in the investment sector in that country.