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00:00 Those who have been following the Chinese economy for the past 20 years
00:06 notice that in every economic crisis, the Chinese government used to resort to what is known as the "bazooka"
00:13 which is a very hostile motivational measures that the Chinese government uses to support the recovery of the economy.
00:22 The Chinese government used it after the financial crisis and also after the coronavirus pandemic.
00:28 Now, the investor wants to see this huge amount of profit, whether in the monetary policy or in the economic support
00:37 to revive the affected economy in the past months.
00:42 But until now, the Chinese government has not resorted to this large amount of economic support.
00:49 Many analysts have pointed out that the government has been reluctant to use this large amount of support
00:55 to reduce the interest rates and other measures to preserve the stability of the Egyptian economy
01:00 especially if we are talking about the huge changes related to the interest rates.
01:06 The last decisions that were taken were to reduce the reserve requirement
01:12 which means the necessary reserve amount for the banks to 50 points.
01:17 Usually, the banks are required to set up a reserve amount for the Chinese People's Bank.
01:24 Whenever the reserve amount is higher, this will pull the liquidity out of the economy.
01:29 When the Chinese People's Bank reduces this reserve amount, it will support the economy by transforming this liquidity
01:37 instead of putting it in the economy inside the Chinese People's Bank.
01:41 Therefore, the bank will initiate the first motivational measure for 2024 and reduce the reserve requirement to 50 points.
01:50 This is the biggest and largest reduction since December 2021
01:55 and will result in a $139 billion increase in liquidity inside the economy.
02:00 What is the goal? The goal is to support the economy and demand.
02:04 Usually, whenever there is a large amount of liquidity, it is necessary to stimulate demand.
02:09 But throughout the past year, we have noticed that this policy has not been successful in supporting the economy internally
02:17 especially in light of the real estate sector's impact.
02:21 Notice that in 2023, we had a reduction in the necessary reserves
02:26 with lower rates than the one we saw in 2024.
02:30 The question now is whether this will be enough in light of the difficulties that the real estate sector is facing
02:38 which usually has a "spillover effect" in China, which means an impact on other sectors and on the economy as a whole.
02:45 How will the investor react to this decision?
02:48 If we look at the stock market indicators, we have indeed seen the biggest daily gains in two months on Hang Seng.
02:53 But we must remember something important, that Hang Seng and CSI 300 were on a large decline of more than 20% from the beginning of the year,
03:02 specifically in January.
03:04 If we only look at the CSI indicator, it reached its lowest level in five years this week.
03:10 Therefore, this rise may not be a strong sentiment and the investor's confidence that these measures will be very effective.
03:20 But the Chinese stock market indicators have become very low.
03:24 Therefore, there may be a kind of a "spillover" that will happen in all cases after reaching very low levels.
03:31 The declines that we have seen in Chinese stocks since the beginning of this year
03:35 have challenged the expectations of JP Morgan and Goldman Sachs, who had hoped that 2024 would bring strong recovery for Chinese stocks.
03:44 In fact, this did not happen at the beginning of this year.
03:47 Let's follow the Chinese dollar. Indeed, the dollar has declined compared to the Chinese dollar.
03:51 But is the reason the price of these measures?
03:54 Not really, because the US dollar in this session was actually weak compared to a basket of currencies.
04:00 Therefore, the situation was not as much related to the strength of the basket as it is related to the weakness of the dollar.
04:06 We must remember that one of the spokesmen for the Chinese People's Bank said that he expects the pressure on the Chinese basket to be reduced
04:14 due to the US federal policy of reducing interest rates and that this will positively affect the exchange rate.
04:24 The Chinese People's Bank spokesman said that he plans to announce plans to hire real estate companies to support industry without direct intervention in this sector.
04:33 He also talked about the possibility of a $280 billion boost to the recovery of stocks and the support of the market stability.
04:39 Shares buyback will increase the value of the existing stocks.
04:43 Will all this be enough in the face of all these crises and troubles?
04:47 Specifically, the problem today is that the demand internally is weak and the demand externally in Asian markets is also weak.
04:57 If we look at the Chinese real estate sector, it is also suffering from problems and we have a slowdown in the global economic growth due to the renewal of the monetary policies.
05:07 Therefore, the question now is whether the Chinese government will be enough to support this economy throughout 2024.