Weekly Buzz: China’s got a 1 trillion yuan plan
Last week, China’s government announced its plan to issue 1 trillion yuan, or 137 billion US dollars, in government bonds. Following the news, the Hang Seng Index climbed more than 2%, and back above the psychologically key 17,000 level.
But when you take a step back, this economic stimulus plan (find our Jargon Buster below for a breakdown!) might not be as big as it sounds.
What’s the potential impact?
Firstly, the money raised from these government bonds will be focused on rebuilding disaster-hit areas in the country, following historic floods in the summer. Even so, this funding could be crucial in supporting local economic recovery.
On a larger scale, this fresh stimulus spending is small – it doesn’t even match 1% of the overall Chinese economy. But China prefers to make small steps: rather than bringing out the big guns, the country’s stuck to a little-and-often approach to tackle its economic slowdown.
China’s careful approach to budgeting is clear in its books: the country's debt is worth around 80% of its economy. That’s not insignificant – but compared to bigger spenders like Italy’s 140% and US’s 110%, it’s on the low side.
In tandem with these new government bonds, the Chinese president also paid a rare visit to the country’s central bank – the knee-shaking equivalent of your boss scheduling an impromptu one-on-one meeting without warning. That’s a sign that the country’s leader is far from content with the state of the economy, and it may well have spurred on the government’s decision to increase its spending.
With the country picking up more than expected last quarter, this tortoise may be inching ahead in the marathon – even if it fell short on the sprint.
As an investor, what does this mean for me?
All in all, it seems China’s not going to take its weak economic recovery lightly. The country’s government is still taking the slow and steady approach, but if push comes to shove, there’s still plenty of room for it to make big moves in boosting its economy.
If you’re interested in investing into China’s growth story, our Flexible Portfolios let you customise your own investing strategy for the country. There’s more than one way to capture growth in the world’s second largest economy, so here’s a quick and easy guide to gaining exposure to China with our Flexible Portfolios.
📰 In Other News
Between Germany and Spain, it’s give and take for Europe right now
Europe’s a diverse place: drive a couple of hours, and sangria and paella turn into champagne and escargot. The same is true on the economists’ tour. Inflation’s finally cooling down in Germany and Spain, but at the cost of a slowdown in Europe’s biggest economy – a real mixed bag of economic news.
A trip to Spain features prices that picked up less than expected in October, with inflation holding steady from September. And to add a little bit of sunshine, Spain's economy expanded 0.3% in the third quarter from the previous.
Then take a train to Germany, and while inflation’s eased to its lowest level in 2 years, the main attraction is the economy’s 0.1% GDP dip in the third quarter of 2023 versus the second. That’s an ominous sign that Europe’s biggest economy is moving towards a recession, which would make it hard for the rest of the region to avoid following suit.
The data at least show that the European Central Bank is starting to win points in its long-fought battle against inflation. And if it stays that way, the bank can slash interest rates to buoy up the region's economy if it does enter a recession.
This article was written in collaboration with Finimize.
🎓 Jargon Buster
Economic stimulus is like that shot of espresso you take in the morning – but for a country’s economy. It’s a jump-start to get things moving again, especially if an economy’s tending towards the sleepier side. To do this, governments and central banks can inject money, cut taxes, introduce policies, or even combine these into a stimulus package.
✨ Guaranteed tax savings and guaranteed returns? We got you!
Good things come in pairs. Combine guaranteed tax savings and guaranteed returns when you invest your SRS funds with Simple Guaranteed.
Compared to just 0.05% p.a if you leave your SRS funds uninvested, earn a guaranteed 3.8% p.a. when you invest with Simple Guaranteed!
🗓️ Save the Date
Join us for a deep dive into the Supplementary Retirement Scheme (SRS). Learn how it would best fit your financial goals, cut your 2023 tax bill, as well as supercharge your retirement savings.
Our Master Your Finances Series 2023 is coming to an end, and we want to end it with a bang! 🎇 We will be concluding the series with an in-person session to give you the tools you need to start your financial journey. Happening on 02 Nov 2023, 6.30 to 8 pm, you will:
- Master strategies and tools to map out your financial goals
- Work hands-on with our team of experts
- Stand a chance to win exclusive prizes
It will be a hands-on, and interactive session where you can speak to our wealth advisors about your financial goals.
✨ Featured in App
✨ Now 3.8% p.a. guaranteed on any amount!
It's simple to get started:
- Create a Simple Guaranteed portfolio.
- Transfer your funds into the portfolio. If you use manual deposit, you’ll be done sooner.
- Lock in the prevailing rate when you’re ready (the rate is reviewed daily).
- Collect your initial contribution and guaranteed returns after your tenure ends!
We thought you might.
Join the hundreds of thousands of people who are taking control of their personal finances and investments with tips and market insights delivered straight to their inboxes.