A Chinese stimulus package will feature measures to encourage consumers and include spending on social services. China will also be investing heavily into infrastructure projects, cutting taxes and cutting interest rates to maintain higher growth.
But be wary that social turbulence in China usually creates tensions with the west with exacerbated traded friction due to protectionist strategies that will devalue their currency in hopes of boosting Chinese exports.
In a year-end review on Marketplace, Scott Tong notes that China hasn’t been immune from the rest of the world’s troubles. The good news is that the infrastructure package will start to kick in next spring. The bad news is that if China slows down much more, the country is looking at social instability.
- SPDR S&P China (GXC): down 51.7% year-to-date
- iShares FTSE/Xinhua China 25 Index (FXI): down 49.6% year-to-date