On September 24, 2024, the central bank held a press conference and announced a new round of economic stimulus plan, planning to inject approximately 300 billion yuan into the stock market, and stated that it will continue to add funds in the future. Overall, this strategy appears quite well-structured; by pushing up the stock market, the intention is to guide residents directly into investing in the financial market. This measure may attract a large amount of capital into the market in the short term, bringing short-term prosperity. However, the sustainability of this effect remains questionable.

Motives Behind the Economic Stimulus

Why launch a new round of stimulus policy at this time? I believe the main reason is that the economic situation is continuously deteriorating. The 5% GDP growth target may be difficult to achieve this year, and the government’s action seems to be a last-ditch effort.

As a large amount of capital enters the stock market, the market may indeed welcome a wave of upward momentum. The overall capital volume of the current A-share market is not large, so this massive injection of funds can certainly push up the stock market in the short term. However, how long this momentum can be maintained depends on the strength of subsequent policies and the determination of the decision-makers.

Long-Term Economic Fundamentals Still Face Challenges

Although the stock market may rise in the short term, from a long-term perspective, the economic fundamentals have not fundamentally changed, and specific problems still exist:

  • Corporate profit margins are continuously declining
  • The unemployment rate has not shown significant improvement
  • The myth of the real estate market “only rising and never falling” has been shattered
  • Highly indebted homeowners are not very interested in further leveraging

From an economic perspective, when an economy faces recession, cutting interest rates is usually seen as an effective means of stimulating market vitality and promoting economic growth. However, the effectiveness of interest rate cuts depends on whether businesses and individuals are willing to borrow at low interest rates and invest. When corporate profits are thin and individuals face the risk of unemployment, even if borrowing costs decrease, few people are willing to increase debt—this is what is known as a “balance sheet recession.”

Shift in Consumption and Investment Expectations

Currently, signs of stagnation have appeared, mainly reflected in the change in people’s expectations for the future. Many people no longer expect promotions and salary increases, and this change in expectation has directly led to a contraction in consumption and investment.

Real estate, as the core pillar of the Chinese economy, I believe this round of stimulus will find it difficult to restart its growth. The reason is that market expectations have undergone a profound shift, and the bursting of the bubble has become a reality.

Changes in the Real Estate Market

In the past, people were willing to leverage and buy homes by pooling resources from “six wallets,” not because housing was an absolute necessity. Aside from basic living needs, almost nothing is an absolute necessity. At that time, housing had a strong financial attribute. People generally believed that housing prices would continue to rise, and investing in real estate could bring generous returns. Therefore, they believed that buying a home was not just avoiding debt, but rather a guaranteed profit investment. From historical data, the national average housing price rose from 500 yuan per square meter to 20,000 yuan, and past investments have indeed yielded returns. However, the current market logic has fundamentally changed.

Conclusion

In summary, I believe the effect of this round of economic stimulus policy will be very limited. The real estate market will remain sluggish, and after experiencing a brief frenzy, the stock market may quickly return to calm, with the index possibly falling below 3,000 again. The long-term economic challenges still exist, and this stimulus may struggle to fundamentally reverse the situation.