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The government raised the local government debt limit by 6 trillion yuan which will be used for hidden debt swap. Coupled with some other measures, it directly increased resources for local government debt resolution by 10 trillion yuan, in order to alleviate local debt burdens and free up funds to support economic growth.
Finance minister Lan Fo’an said that the central government still has substantial room for increasing borrowing and vowed to take more vigorous fiscal policy, with more counter-cyclical adjustments on the horizon.
Meanwhile, the People’s Bank of China (PBOC) pledged to maintaining an accommodative monetary policy and Premier Li Qiang stressed promoting stable foreign trade growth to bolster the economy.
Premier Li remarked that China’s economic indicators have shown comprehensive recovery and he expressed confidence in achieving this year’s economic targets.
China’s exports grew at the fastest pace since April 2023, sharply beat market expectations, though some believe the growth was partly driven by the pull-forward of short-term orders and export redirection. On the flip side, imports saw the weakest performance in four months, indicating domestic demand remained weak.
The service sector expanded fastest in three months in October amid stimulus policies. High-frequency data point to improvement in other economic indicators. Tax data showed Chinese businesses’ sales revenue achieved both year-on-year and month-on-month growth in October.
However, inflation data missed expectations. Consumer prices grew at a slower pace, with a return to a month-on-month decline for the first time since July. Factory-gate deflation deepened, though the month-on-month drop narrowed significantly, as domestic demand for some industrial products rebounded.
The offshore yuan broke through the 7.2 per dollar mark to hit its weakest since August after Donald Trump declared victory in the US presidential election.
Chinese A-shares rallied this week, with the Shanghai Composite Index surging more than 5%, while Hong Kong stocks was muted.
New accounts in the A-share market hit a nine-year high in October amid a strong market rally. Institutional investors remain bullish, with Goldman Sachs maintaining overweight rating for A-shares and H-shares, expecting 20% potential returns over next 12 months. UBS expects A-shares to see a clear recovery in earnings in the first half of 2025. Meanwhile, overseas funds slightly reduced their underweight positions on China.
Securities brokers’ shares were active on hopes of industry consolidation after Western Securities acquired a controlling stake in Guorong Securities.
A PBOC official vowed to promote financial opening-up in a symposium with foreign financial institutions and a vice chairman of the China Securities Regulatory Commission (CSRC) pledged to enhance A-shares’ investment value and create long-term returns for investors.
Analysts see the strong momentum in housing market continue into November, with home sales in major cities growing further in early November. The real estate sector’s financing grew for the second consecutive month.
China’s Ministry of Industry and Information Technology held a major meeting on promoting the high-quality development of the low-altitude economy, pledging improvement of infrastructure, policies and financial support.
The State Council issued comprehensive guidelines to boost the vitality of the ice and snow economy, aiming to expand the industry to1.2 trillion yuan by 2027.
Regarding company highlights, SMIC, China’s top chipmaker, reported a record Q3 revenue, surpassing $2 billion for the first time, and Hua Hong Semiconductor saw a massive 222.6% increase in its net profit, triggering a rally in semiconductor stocks.
BYD Company has becomes the first Chinese carmaker to sell over 500,000 cars in one month and the first globally to sell over 500,000 new energy vehicles in a single month. CICC raises BYD’s target price by 18%, seeing great potential for profit growth. BOCOM International said BYD’ Q3 profit, revenue, gross margin all beat expectations, with Q4 sales expected to rise further.
Xpeng Motors’ stocks hit an 11-month high after launching its first AI-defined vehicle model Xpeng P7+. Morgan Stanley expects the stocks to raise and Deutsche Bank sharply raised forecast of monthly sales of Xpeng P7+.
Xiaomi’s stock hit the highest since June 2021, surging over 80% year-to-date, after it unveiled new SU7 Ultra vehicle. It has entered the property insurance market through a joint venture with BNP Paribas and Volkswagen.
In the commodity market, China’s bulk commodity price index rose by 3% month-on-month in October. Notably, alumina futures hit a record high amid tight supply and surging demand.
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