The Chinese government's announcement of a 200 billion yuan ($28 billion) stimulus aimed at local investment projects fell short of market expectations, triggering a sharp sell-off in major tech stocks.
What Happened: The National Development and Reform Commission (NDRC), China’s top planning agency, disclosed the allocation at a press conference on Tuesday, reported CNN.
“We are confident in achieving the annual economic and social development goals and tasks, and in maintaining sustained, stable and healthy economic and social development,” said Zheng Shanjie, the commission’s chairman, according to the report.
China had set a 5% growth target in March. However, recent economic data has been concerning, raising fears that the target might not be met. The country’s economy is currently grappling with challenges such as a property crisis, weak consumer spending, and high youth unemployment.
To assist local governments dealing with significant debt burdens, Beijing will provide 100 billion yuan ($14 billion) from the central government’s budget, in addition to an extra 100 billion yuan for investment projects, Zheng stated.
Mainland China's CSI 300 surged over 10% at the open on Tuesday following its return from the Golden Week holiday, but the index pared back gains to close 5.93% higher at 4,256.1.
In Hong Kong, the Hang Seng Index initially plunged more than 10%, before moderating to a 9% loss by its final hour of trading.
Key Chinese tech stocks were hit hard:
- Alibaba Group Holding Ltd – ADR BABA fell 8.93% in pre-market trading.
- Tencent Holdings Ltd TCEHY dropped 8.32% to HK$ 438.60.
- JD.com Inc JD saw a sharp decline of 11.32% in pre-market trading
- Baidu Inc BIDU slipped 9.10% in pre-market trading.
Why It Matters: The Chinese economy has been facing significant challenges, with the government implementing various measures to stimulate growth. In a recent move, the People’s Bank of China cut one of its main interest rates and reduced the amount of cash banks are required to hold in reserve.
The government also announced cash handouts to disadvantaged citizens and subsidies for recent graduates struggling to find employment.
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Disclaimer: This content was partially produced with the help of AI tools and was reviewed and published by Benzinga editors
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