China’s economy is in bad shape. Can its ‘whatever-it-takes’ stimulus effort turn things around?

After four miserable years, stock market in Hong Kong and mainland China are finally soaring, but whether benefits from the economic stimulus measures announced in September spread beyond stock investors and into the real economy have yet to be seen.

After four miserable years, a soaring stock market has brought relief for Francis Lun, who runs a small 10-person brokerage in Hong Kong. Since the beginning of 2020, he’s seen the city’s lifeblood, its Hang Seng Index, experience an unprecedented consecutive decline due to economic woes and pandemic restrictions, both in the semi-autonomous region and in mainland China. But the benchmark’s fortunes were unexpectedly turned around in late September when China’s top leaders announced a raft of measures to support the country’s flailing economy. The index has since rallied more than 18%, its biggest two-week gain in nearly 20 years. The stimulus measures should have come far sooner, says Lun, but better late than never. “Before (the announcement), we were just counting our fingers every day,” he told CNN in his office in the Causeway Bay neighborhood, referring to the lack of business. “But now, we’re getting calls. Things are picking up.” Hong Kong and China markets are on a roll. But whether the rally continues and, more importantly, whether benefits from the stimulus measures spread beyond stock investors and into the real economy, which is suffering from a potential deflationary spiral and is at risk of missing its own 5% target growth rate, depends on what hasn’t yet been said. So far, the measures announced have focused on monetary policy, which typically refers to decisions made by central banks to influence the cost of borrowing and control inflation. Beijing has largely held back on unveiling fiscal measures, which can include the use of taxation or other measures to impact public spending.