China Stocks Soar in Biggest Single-Week Jump Since 2008

Economic stimulus moves triggered a broad rally in trading in Shanghai and Shenzhen.

An abrupt move by China’s leaders to prime the economy with stimulus has produced a powerful rally in the country’s stocks, which have posted their biggest single-week gain in nearly 16 years.

On Friday, the CSI 300 index of big Chinese companies traded in Shanghai or Shenzhen rose 4.5 percent and was up 15.7 percent this week.

The gain was the largest in a single week for the index since November 2008, when share prices were gyrating violently with the onset of the global financial crisis.

The volatile Hang Seng Index in Hong Kong, which includes a range of companies with activities in Hong Kong and in mainland China, was also up 12.8 percent this week.

The increases pulled the mainland Chinese CSI 300 index into positive territory for the year and have sent Hong Kong stocks rocketing 21 percent higher in 2024. Those are big turnarounds for markets that have been lagging those in other parts of Asia and the United States for well over a year.

Sharp gains in China could shore up public confidence, at least temporarily, as the Chinese economy faces broadly falling prices, weak retail sales and a housing meltdown. The government has been trying to rebuild confidence to persuade consumers and home buyers to start spending money.

On Tuesday, China’s top financial regulators announced a package of measures, including interest rate cuts and requiring smaller mortgage down payments. One of the changes took effect on Friday: allowing commercial banks to lend a larger proportion of their assets.

Shares got a particular boost on Tuesday when regulators said at a news conference that banks would be allowed to lend heavily to companies to repurchase their shares, as well as to major shareholders to buy larger stakes in companies. Both moves could provide stronger financial support for stock purchases and help elevate share prices.

The next day, the Ministry of Civil Affairs and the Ministry of Finance announced that local governments would be expected to make one-time payments to the needy before the start of a weeklong national holiday on Tuesday.

“While the exact size and scope of the handout are still unknown, it marks a new willingness by the government to provide direct relief to the very poor,” said Xinran Andy Chen, an economics consultant in Beijing.

China’s Politburo, the two dozen men who lead the ruling Communist Party, met on Thursday and called for further action to help the economy, without providing much detail.

Steps mandated in the Politburo statement were vaguely phrased, but appeared to signal a further inclination to use government money to stabilize financial markets and the economy.

“We must work hard to boost the capital market, vigorously guide medium- and long-term funds into the market, and clear the bottlenecks for social security, insurance, wealth management and other funds to enter the market,” said the statement, which also called for stabilizing the real estate market.

Economists are divided on whether China will use the planned distribution of money to the poor as the starting point for a broader program to expand the social safety net and increase the role of consumer spending in the Chinese economy. Xi Jinping, China’s top leader, has expressed considerable wariness over the years about greater government support payments to the poor.

He warned three years ago that China “must not aim too high or go overboard with social security, and steer clear of the idleness-breeding trap of welfarism.”

Li You contributed research.