China stagnates this week despite Beijing's allusions to "more powerful" stimulus

Hong Kong Hang Seng Index
HSI
-1.44%

closed up 1.53% on Monday with Japan's Nikkei
NIK
-0.11%

up to 1.05%. The Asia Dow Index
ADOW,
-1.25%,
Of the 30 main companies in the region, it jumped by almost 2% in morning trade before falling to 1.22% at the end of Monday's session. The Nikkei 225 posted a gain of 0.1% on Tuesday to modestly extend its weekly gain.

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The most important new policy in the region for the week has been the People's Bank of China Quarterly Monetary Report. The document, released Sunday, directly mentions several new areas of interest, but it was the silent absence of previous language that most surprised many observers.

The report is missing, unlike the last quarter, the bank intended "to avoid excess liquidity flooding the economy". The omission "signals a further expansion of monetary policy," said analysts at Citic Securities.

Although China has put in place a series of progressive financial support measures throughout the pandemic and its aftermath, including reductions in the reserve and loan rates, as well as unemployment benefits, it remains 39; is abstained from all that comes close. to the $ 560 billion stimulus package that was deployed during the 2008 global crisis.

The latest report also underscored the importance of economic growth, a relatively undervalued target among other past targets, despite a contraction of GDP in the first quarter of 6.8% of GDP. And again, he promised incessant measures to reduce historically high unemployment.

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It is unclear why this afternoon on the road from China to stimulus policy makers, they are hinting at bigger stimulus measures, but unemployment is surely coming to mind.

The economic collapse in other countries has affected demand for Chinese products and Beijing expects domestic consumption to stimulate activity. However, even with most stores open, consumers don't buy much. And one reason is an official urban unemployment rate of 5.8%, which could actually reach 30%, according to Fitch Ratings.

Chinese leaders have repeatedly said that good employment figures are essential for domestic consumption and political stability. Prime Minister Li Keqiang even said that "stability in the labor market" outweighs other central concerns, such as the overall rate of economic growth.

The report included several other notable promises, including a growing market-oriented yuan exchange rate reform, with a less managed floating rate system tied to a basket of coins. He also said that long-term inflation and deflation were not of concern and that prices would remain stable.

Meanwhile, Chinese traders were also aware of the less optimistic news released on Sunday that a new wave of coronavirus cases in the northeast of the country was serious enough to designate a city in Jilin Province as high. risk. Before the dozen new cases, all of China had been downgraded to low risk in the three-tier system.