By Sagar Ram Rane 
These days China’s stock market is experiencing “euphoria”, and many people are talking about it. On Friday, China’s central bank announced that the banks’ reserve requirement ratio (RRR) has been cut by 50 basis points. This decision is giving the market another boost. But is this happiness just temporary?
China’s stock market situation: Recently, the CSI 300 indexᅳwhich tracks China’s biggest companiesᅳsaw a jump of 1.4%. Traders are buying stocks out of joy, and this euphoria is continuing despite some major problems in the economy. Everyone feels that the Chinese government and financial institutions are going to work together to boost the economy. But some uncertainties are hidden behind this optimism.
According to Bloomberg reports, the upward trend in the stock market may be just a reaction of the surface. Somewhere down the line, people are aware of China’s deeper financial issues and slow growth, but for now everyone is ignoring it.
Impact of Government The Chinese government has taken many initiatives to support the market, including this latest RRR cut, which will give banks an opportunity to pump more money into the market. After this decision, people are expecting that it will solve the liquidity issue and give a boost to the market to rally further.
According to Reuters, this step has been taken to push liquidity in the Chinese economy so that the slowdown and property crisis can be addressed. But even now many experts say that all these measures are not enough for the long term.
Market Euphoria vs. Ground Reality At this time traders and investors feel that the Chinese market is about to recover now. But many economists are cautioning that this euphoria may just be a “short-term relief” as the real challenges are still facing the economy. That is, this euphoria may not last for long if fundamental issues are not handled properly.
So, the current euphoria is a reason for stocks to go up, but the ground reality is quite different. Traders are looking at profits for now, but if China’s long-term growth challenges are not resolved, then this euphoria may end soon.
Key Takeaways
China’s Central Bank cut 50 basis points in RRR, which is expected to increase liquidity in the market.
CSI 300 saw a growth of 1.4%, which shows the excitement of traders.
The market euphoria is still strong, but it could be short-lived if deeper financial problems are not resolved.
Investors and traders should keep long-term sustainability in mind along with short-term gains. Financial boosts alone will not suffice to sustain China’s economy; significant improvements are needed at the ground level as well. As good as the euphoria may seem, that happiness will not last long without sustainable growth.