Despite several stimulus measures from China, the market is not entirely convinced. The concern on the stock exchange in recent days has prompted Chinese authorities to flag additional financial policy measures.
Over the weekend, Finance Minister Lan Fo'an is expected to present measures that "concern the country's tax policy", according to a press release.
China is in a situation where it needs to do more to turn the economy around, partly to stabilize the property market but also to ensure that people consume more, says Allan von Mehren, chief analyst at Danske Bank.
The two major engines of the Chinese economy – households and the property sector – are stalling. A tough economic situation has led the Chinese to put the brakes on and reduce consumption. Moreover, the country's property sector is struggling with significant debt problems.
Higher Expectations
According to Kristina Sandklef, an independent China analyst, the country is currently in a tough economic situation and more is needed to get the economy going.
"Structural reforms of the economy are required to get it going again, for example, better pensions, higher retirement age, child benefits, better social safety net", she writes in a comment.
China has recently announced several economic stimulus measures, including interest rate cuts. Initially, this contributed to lifting the stock market climate, but over the past two days, the Hong Kong stock exchange has fallen back significantly after investors had hoped for more.
Continuing with Stimuli
Allan von Mehren also believes that more measures are needed, but how much will be required is impossible to say.
You have to keep going until it takes effect.
According to him, there is no reason to worry at present, but if the crisis continues and China does not get out of this, it poses a significant challenge, among others, for companies in other parts of the world.
China has managed to avoid the big collapse that many have feared. But it would be good for the global manufacturing industry if China can grow more, says Allan von Mehren.
