China weighs stock market rescue package backed by $278 billion

(Bloomberg) — Chinese authorities are considering a package of measures to stabilize the slumping stock market, according to people familiar with the matter, after earlier attempts to restore investor confidence fell short and prompted Premier Li Qiang to call for “forceful” steps.

The formation of a state-backed stabilization fund has been contemplated since at least October, though some investors have raised doubts over its efficacy as Beijing’s previous rescue efforts haven’t always worked. China’s property crisis, depressed consumer sentiment, tumbling foreign investment and diminished confidence among local businesses after years of volatile policymaking are exerting pressure on both the economy and markets.

“The potential support package should be able to stem declines in the short term and stabilize markets into the Lunar New Year, but state buying alone has historically had limited success in turning around market sentiment if not followed up by further measures,” said Marvin Chen, a strategist at Bloomberg Intelligence.

Onshore Chinese shares pared an earlier rally to end just 0.4% higher. A gauge of Chinese stocks listed in Hong Kong rose 2.8%, easing from an intra-day gain of 4.1%.

Officials are also weighing other options and may announce some of them as soon as this week if approved by the top leadership, the people said. The plans are still subject to change. The China Securities Regulatory Commission didn’t respond to a request for comment.

At a State Council meeting on Monday, chaired by Li, China’s cabinet received a briefing on the operations of the capital markets as well as considerations for related work, according to an official statement, which didn’t provide more details on what Beijing is mulling.

In all, more than $6 trillion has been wiped out from the market value of Chinese and Hong Kong stocks since a peak reached in 2021, underscoring the challenge that Beijing faces as it seeks to arrest a decline in investor confidence.

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