4 months ago • 2 mins
What’s going on here?
China’s leaders are pulling the strings to reanimate their flagging economy, a move that gave the country’s stock market a much-needed jolt on Tuesday.
What does this mean?
China’s economic puppet masters, the Politburo, pledged a raft of measures to perk up the economy at their pivotal July meeting. The all-important property market was right at the top of the agenda, but the to-do list didn’t stop there. It also included tackling local government debt issues, making stable employment a key goal, and reinforcing domestic demand – in other words, sorting everything out. But investors know that talk is cheap, and if this one-day rally is going to turn into something sustainable, those promises will need to translate into concrete policy changes.
Why should I care?
For markets: Word-leader word search.
Economists and strategists love to play detective with major announcements, hunting for any changes in official wording. And one line was conspicuously absent from this July’s Politburo statement: “Housing is for living in.” That former mantra used to serve as a reminder that the property market isn’t a playground for speculators – a major cause of the country’s current problems. So now optimists are hoping this new tack signals a change in the government’s approach, suggesting that China’s leaders are poised to pull out all the stops to prop up the flailing housing market.
Zooming out: Cereal killer.
The prices of all sorts of raw materials from oil to wheat have started to come back to life recently. And that uptick isn’t random: it’s the result of a potent mix of continued supply disruptions coupled with Western economies exceeding expectations. Throw a potentially springier China into the equation, and you’ve got a recipe for even higher prices. So just as inflation seemed to be heading for the exit, a major rally in commodity prices could wind up inviting it to linger.
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