China makes a rare intervention to boost confidence after the market crash

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China makes a rare intervention to boost confidence after the market crash

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China’s top economic official spoke on Wednesday to reassure investors, saying Beijing will take steps to support the economy and financial markets after a strong sell-off that accelerated in the wake of the Russian invasion of Ukraine.

Liu He, deputy premier and economic adviser closest to President Xi Jinping, said the government will take measures to “revive the economy in the first quarter”, as well as introduce “pro-market policies”. He did not specify what specific measures would be taken.

Liu released the comments after calling a special meeting of the State Council’s Financial Stability and Development Committee, which he chairs, according to a summary of the meeting published by Xinhua, China’s official news agency. The FSDC oversees the country’s major financial regulators, including central bank and securities control, and meets regularly, but such a broad statement to boost confidence is rare.

Investors in Shanghai, Shenzhen and Hong Kong, as well as in US-listed Chinese companies, have been frightened by slowing economic growth, the inflationary aftershocks of the war in Ukraine, and a lengthy crackdown by the Xi administration on fast growing companies formerly the technology, education and real estate sectors.

Beijing also suspended plans to expand processes of a property tax announced late last year, Xinhua reported separately, citing the finance ministry, in a move to ease pressure on the highly indebted real estate sector.

The meeting supervised by Liu addressed a wide range of issues that added to the uncertainty about the Chinese economy. Beijing is expected to speed up and quickly complete the rectification of the country’s major technology platforms by making sure policies are transparent and clear, according to the Xinhua meeting summary.

Chinese equities rose higher on Wednesday, with Hong Kong’s benchmark Hang Seng index having its best day since 2008, up more than 9.1% after hitting a six-year low the previous day. .

The Hang Seng Tech index jumped 22.2% after the meeting, with shares of Alibaba and Tencent, the two largest Chinese internet groups, by 27.3% and 23.2% respectively.

The CSI 300 index, which tracks the largest listed companies in Shanghai and Shenzhen, closed up 4.3% after falling more than 13% following the Russian invasion of Ukraine on February 24.

Larry Hu, Macquarie’s chief Chinese economist, said Liu sent a strong message, “suggesting that policy makers are deeply concerned about the recent market rout.”

Ming Liao of Prospect Avenue Capital said: “With the market sell-off and the bad economic situation they have decided to take action.”

He added: “They have made it clear that China will solve the delisting problem for tech companies in the US, but I don’t think the regulation of platform companies will end completely. It may be thinner in the future. ”

The expected delisting of Chinese companies in New York for access to audit ledgers also weighed heavily on their shares, with sales accelerating after the U.S. Securities and Exchange Commission named the first of up to 270. groups that will be targeted if they do not deliver audit documents.

The FSDC said it had made progress on the matter with the SEC and that they were working on a plan to resolve the deadlock.

“The Chinese government supports companies from all sectors to go public overseas,” said the summary of the meeting.

The committee also urged regulatory agencies to implement policies that are beneficial to the economy and to be wary of engaging in policies that detract from growth.

“For any policy that will impact financial markets, it should first be coordinated with financial regulators,” the committee said.

Additional reporting by Sun Yu and Edward White

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