Fool me once…

Hong Kong-traded Chinese shares rose for a 10th consecutive session on Thursday. The 4.75% advance took this week’s gain to 11%. On the mainland, the CSI 300 rose a seventh day. It’s likewise up double-digits for the week.

As the simple figure below shows, these count as stupendous gains. Whether they count as stupid depends on whether Beijing’s efforts to put a floor under growth prove a measure of successful, or whether easing announced this week by PBoC governor Pan Gongsheng will fall flat for lack of fiscal follow through.

For context, if the gains hold, this would be the best week for H-shares in 13 years, and the best week for the mainland benchmark since 2014. To reiterate: These are policy bets. Or state-buying. Both.

These kinds of U-turn rebounds in Chinese equities are notorious for petering out. Xi’s a master of the dead cat bounce. And indeed, this rally might already be over were it not for state media, which on Thursday detailed a Politburo meeting during which Xi and friends convened to “analyze and study the current economic situation.” A readout of that meeting was the impetus for the rally extension.

The first thing you should know about the Chinese economy in 2024 is that it’s actually fine. According to the Party, anyway. Things are “stable and steady” and China’s making “progress,” the readout said. As to who you can thank for that “progress,” look no further than “Comrade Xi Jinping,” “the core” of the Party and the man who deserves high praise for “uniting and leading people of all ethnic groups across the country” in their quest “to overcome difficulties.”

Those are quotes from the meeting readout, which was every bit the farcically laudatory, cartoonishly groveling asseveration you’d expect, even as it at least conceded that the waters are choppy right now.

Although “the fundamentals” of the economy are “favorable,” and while China’s “great potential” remains, “some new situations and problems have emerged,” the Party said. But that’s ok, because Xi knows what “must” be done. Here it is, in all it’s (translated) glory:

We must look at the current economic situation comprehensively, objectively and calmly, face up to difficulties, strengthen our confidence, and effectively enhance our sense of responsibility and urgency in doing a good job in economic work. We must focus on key points, take the initiative, effectively implement existing policies, increase our efforts to introduce incremental policies, further improve the pertinence and effectiveness of policy measures, and strive to complete the goals and tasks of economic and social development throughout the year. The meeting stressed the need to safeguard the bottom line of people’s livelihood, focus on employment for key groups such as fresh college graduates, migrant workers, people who have escaped poverty, and zero-employment families, and strengthen support for groups with employment difficulties such as the elderly, the disabled and those who have been unemployed for a long time. We must strengthen assistance to low-income people. We must ensure the supply and price stability of important materials such as food and water, electricity, gas and heat. We must earnestly do a good job in grain and agricultural production, care about farmers’ income growth, and do a good job in autumn and winter production to ensure national food security.

That’s a lot of “musts.” And I “must” tell you: We’ve heard it all — every, single, last bit of it — before.

Listing every conceivable challenge the country faces arguably undermines the effort to instill confidence by emphasizing just how big the job of managing the Chinese economy really is, particularly when that job falls to one man. And the conspicuous lack of specifics only heightens the conviction of skeptics. Like me.

The Politburo readout was enough for markets on Thursday, but let’s be honest: It was woefully short on fiscal policy prescriptions. As usual. Yes, there was a whole paragraph dedicated to stimulus, but true to form, even the Party’s specifics were remarkably unspecific. For example:

• The government’s going to “ensure necessary fiscal expenditures.” How much is “necessary”?
• Beijing’s going to “issue and use long-term special treasury bonds and local government special bonds to better play the driving role of government investment.” That’s good to hear. But, again, how much? What’s the size of that incremental issuance? (A bit more on that below.)
• Beijing’s going to “lower the deposit reserve ratio and implement strong interest rate cuts.” We know that won’t work. Demand for credit isn’t there. At any price.
• The government “should promote the real estate market and stop it from falling.” No arguments there. But how? Tell the market — hell, tell Chinese, because that’s who really needs to know — how the Party’s going to do that.
• The Party “should respond to the concerns of the people, adjust the housing purchase restriction policy, reduce the interest rate of existing mortgage loans, speed up the improvement of land, fiscal and taxation, finance and other policies, and promote the construction of a new model of real estate development.” Again, that all sounds good, but a list of “shoulds” and “musts” isn’t a plan.

You get the idea. The readout carried on and on, before dead-ending in the usual exhortation to leap forward and meet challenges as one determined people on a long march to a great destiny. Everybody — citizens, bureaucrats, businesspeople, pigs, chickens, pigeons, rats and pandas — “should work hard [to] stimulate the enthusiasm and creativity of the whole society” in the interest of “promoting high-quality development, and the sustained recovery of the economy.”

That’s just a word salad. Strung-together bromides and Xi-isms presented as a policy statement. “Nebulous” would be a very generous adjective.

I’m not suggesting it won’t work out for Xi’s China. Actually, you know what? I am suggesting that. Because things don’t usually work out for the populace under leaders like Xi. He’s a despot, after all. What does history say about the plight of the masses under despotic rule? (That’s a rhetorical question.)

Subsequent reporting suggested the special sovereign debt issuance referenced in the meeting readout will amount to CNY2 trillion or roughly $285 billion. Bloomberg quoted Jones Lang LaSalle’s Bruce Pang, a mainstream media mainstay when it comes to coverage of the Chinese economy. “Two trillion yuan well beats expectations,” he said. “This is a big bang fiscal stimulus.”

Politely: Color me skeptical. Impolitely: I don’t know what Bruce is talking about. According to Barclays, the property crisis has cost Chinese households $18 trillion in wealth. That’s 18 trillion USD. And Xi’s going to throw an extra 2 trillion RMB at the problem. How does that math work? That wouldn’t be enough even if the Party had a plan to use it in a way that directly facilitated household spending. I can assure you there’s no such plan.

The Politburo readout closed by encouraging Party cadres to “be brave and dare to innovate.” Xi, Xinhua said, will “support those who do things.” As the kids say, GTFOH.