Beijing will continue to prop up a stumbling Chinese economy with mini-stimulus measures. China exchange traded fund investors, though, shouldn’t expect oversized returns as the country only tries to mend any perceived weaknesses.
In a speech last week, Premier Li Keqiang was comfortable with growth at “slightly higher or lower” than the government’s 7.5% growth target as long as the economy is adding enough jobs, reports Alex Frangos for the Wall Street Journal.
Specifically, Li revealed that the unemployment rate was steady at around 5% in August.
Société Générale’s Wei Yao argues that a shrinking labor force and a greater portion of the economy dedicated to consumer services means that the country can continue to create jobs despite a slowing growth rate.
China’s economy has shown signs of weakness. Industrial production, retail sales and property activity are advancing more slowly than anticipated. The supply of unsold residential property surged to its highest level on record despite price cuts and financial aid from the local governments.
Consequently, Chinese markets have slowed down. The iShares China Large-Cap ETF (NYSEArca: FXI) dipped 0.1% over the past month and the SPDR S&P China ETF (NYSEArca: GXC) declined 0.7%. [China ETFs to Capture Long-Term Growth Opportunity]
If the government is less concerned about missing its 7.5% growth rate, Beijing will unlikely issue a broad interest-rate cutting scheme unless the economy rapidly deteriorated.
So, investors will likely see mini-measures to continue to targeted areas of the economy to shore up any weakness. The new regime will help keep the economy expanding, albeit at a slower pace, diminish its reliance on debt and provide more room for reforms to take hold.
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Max Chen contributed to this article.