As investor pessimism pushed China’s stock market into a bear market last week, officials responded as they often do, deploying a group of state-owned funds to arrest the slide.
The group of Beijing-backed investment companies, known colloquially as the “national team,” pumped $6.8 billion into stocks in a single session last Thursday, providing a temporary reprieve to a market that had fallen for 11 straight weeks.
Mainland stocks are down more than 20 percent from a recent peak — the threshold for a bear market.
But this time, investors are signaling that the old playbook may not be enough. By Tuesday, markets fell again, declining 1.3 percent. Stocks in China are among the worst performers in Asia this year, along with Indonesia and India.
The intervention may have helped to “prop up the market,” said Shi Shusi, a financial commentator with 2.6 million followers on Chinese social media. But, he added, “it couldn’t prop up investors’ confidence.”
The effort to stabilize stocks came just days before Xi Jinping, China’s leader, convened one of the country’s most important political meetings of the year. Hundreds of the Communist Party’s most senior officials are meeting to set the government agenda. While economic policy has traditionally been a priority at such gatherings, many observers expect it to take a back seat to politics this year.
The market sell-off reflects a deeper unease about China’s economy and growing doubts about whether policymakers are doing enough to turn things around. China’s manufacturing juggernaut has powered a surge in exports, sustaining economic growth and helping Beijing meet its targets.
But that strength has obscured persistent weakness at home.
Wage growth is slowing. Companies are struggling to raise prices. And households, whose savings are largely tied up in real estate, continue to see their wealth eroded by falling home prices.
“If the government keeps pumping money in, we will see short-term gains, but this will not continue,” said Gary Ng, a senior economist for Asia Pacific with Natixis Corporate & Investment Banking, referring to the national team, which also intervened in July to steady the market.
“The government will try to set a floor here, but whether there could be a strong momentum for rebound will take a lot more than what we see right now,” he added.
For many investors, the bigger concern is that Mr. Xi seems more focused on his political aims than on stimulating growth. That priority is on display this week as officials meet to lay the groundwork for his fourth term as party leader.
Beijing has intensified an anti-corruption campaign that ensnares around one million officials each year. Under Mr. Xi, China has tightened scrutiny of money flowing overseas and stepped up regulatory and antitrust actions against prominent companies.
Those measures have unnerved entrepreneurs, analysts said, adding to uncertainty about the business environment.
Local governments have also pulled back subsidies and tax breaks, making companies more cautious about investing.
Some of the sharpest declines in recent weeks have come from artificial intelligence companies, once among the market’s biggest sources of optimism.
Shares of Cambricon Technologies, a state-backed chipmaker seen as a Chinese rival to Nvidia, have fallen more than 10 percent over the past month. The CSI Artificial Intelligence Index, which tracks leading Chinese A.I. companies, has dropped 19 percent over the same period.
Investors are now searching for signs that Beijing will go beyond buying stocks and introduce broader measures to revive the economy.
“We’re reaching the pain point where officials feel they must intervene,” said Christopher Beddor, deputy director of China research at Gavekal Dragonomics.
In 2024, China’s central bank unveiled a sweeping package of measures to bolster confidence and stimulate growth. It cut short-term interest rates and freed up state-controlled banks to lend more. At a rare news conference, the central bank governor signaled that it could provide further support.
Stocks surged, posting their biggest gains since the 2008 financial crisis.
But analysts are skeptical that policymakers will adopt the same approach this time. Even large purchases by the national team are no substitute for the wide-ranging stimulus investors have long hoped for.
Instead, Chinese officials have focused on reassuring markets.
Speaking at a forum last week, Wu Qing, chairman of the China Securities Regulatory Commission, told investors that market steadiness remained a priority. The government was “making every effort to safeguard the security and stability of the capital market,” he said.
State media have amplified the message.
On the same day, China’s state broadcaster declared that “positive signs are increasing,” and that “the basis for market resilience remains firmly in place.”
The People’s Daily, the Communist Party’s official newspaper, also struck an upbeat tone this week, pointing to China’s “reasonable” economic growth despite geopolitical conflicts and a fragile global economy.
Emphasizing the importance of “high-quality development,” the article described growth as a “long-term endeavor,” warning that “winds and rains are inevitable along the way.”
The post What China’s Patriotic Stock Buying Tells Us About Its Economy appeared first on New York Times.
