Not the US Federal Reserve, but China may hold the cards to the next surprise for global markets. At this stage, even a modest growth target of 5% seems tough for the world’s second largest economy, triggering expectations of a stimulus from the Xi Jinping administration.

Three data points tomorrow may act as a catalyst for global markets that expect a fresh stimulus from China. These are house price index, industrial production, and the latest trend in retail sales.

“Where can the positive surprises come from? The positive surprises can come from – there’s some talk about China throwing more liquidity at the market, trying to accelerate mortgage reductions for homeowners in China, other measures to try to get what seems to be a downward spiral in the Chinese economy halted,” Arvind Sanger, Managing Partner, Geosphere Capital Management, a New York-based investment advisory firm.

The yield on the most actively traded 10-year sovereign notes slid to 2.075%, a level unseen since official record became available in 2002, according to data from Bloomberg.

“All regions and departments should studiously implement all the major economic initiatives and measures introduced by the Central Committee and deliver on the economic tasks for the third and fourth quarters,” President Xi Jinping reportedly said on September 12.

The slump is visible both in the private and the public sector in China. Overall, public spending in the first seven months of 2024 was 2% less than the same period last year.

All the steps that the Chinese government has taken so far in 2024 to stimulate growth: 

In July, banks’ reserve requirement ratio was cut to 10%, which was expected to add $140 billion into the economy and encourage banks to lend more.

Last week, the local government of Guangzhou removed the cap on the number of apartments one could purchase.

The government doubled the subsidy to 20,000 yuan for people buying new electric vehicles. It worked.

Will Xi Jinping step on the gas again? While the stock markets in China will remain closed on Monday and Tuesday, September 16 and 17, other markets will watch the depth of the economic slowdown.