China's Economic Stimulus: Global Market Implications and Effects

China's massive stimulus could spark global asset price inflation, benefiting investors worldwide.

### China's Economic Stimulus: Impacts and Implications for Global Markets
* 🏦 China has initiated its largest economic stimulus since the pandemic, with economists describing it as a "**stimulus blitz**" led by the central bank to **pump more money into the economy**.
* 💰 The focus is on making loans cheaper, particularly for mortgages, as the country attempts to **prevent a potential economic collapse** that was narrowly avoided.
* 📉 With the real estate sector comprising **30% of China's economy**, the People's Bank of China has lowered the reserve requirement ratio for banks, freeing up approximately **1 trillion Yuan ($142 billion)** for new lending.
* 📊 Additionally, the central bank has reduced the interest rate on existing home loans, potentially **saving households around 150 billion Yuan ($21 billion) annually**, which could **stimulate consumer spending**.
* 📈 As a result of the stimulus, significant gains are being observed in the stock market, with companies like **Alibaba and JD.com experiencing double-digit percentage increases** shortly after the announcement.
* 🌍 This stimulus is expected to have a ripple effect on global markets, particularly in the U.S., as **asset prices historically rise** when major economies introduce such packages, impacting **investment portfolios positively**.
* 💵 However, there is a cautionary note regarding the **risk of asset bubbles forming** due to the influx of liquidity, prompting investors to **remain vigilant while continuing to invest strategically**.
* 🔍 Overall, the expectation is for **continued stimulus measures** in China and potentially in other economies, leading to **inflationary pressures on asset prices** over the next **6 to 12 months**.

China just pulled the trigger on the biggest economic stimulus since the pandemic. Economists say China has unleashed a quote-unquote stimulus blitz. The country's central bank is leading the charge. Here it is, pumping more money into the economy. Loans are being made cheaper. One big area of focus is mortgage. Remember those videos about the Chinese economy collapsing, and then it never happened? Except it almost just did, but then it didn't, because China just did one of these. They injected some liquidity into the system. And you remember what Robin Williams said about liquidity? I talked to them about being like a group of junkies who relapsed, going, Listen, man, I just need some liquidity, you know what I'm saying? I just ran into some bad subprime, you know? We just had complex formulas, we just didn't factor in greed and panic, you know? I just need $85 billion by Tuesday. We're talking trillions of Yuan being pumped into their system, interest rates slashed, and banks given more financial liquidity, and government support flowing into their

real estate sector. And this isn't just a story about China; this is going to have a huge effect across the entire global economy, especially across US markets, which will have an effect on our investment portfolios. And that's because China is the world's second-biggest economy, and if they sneeze, the rest of the world could also catch a cold. And the stimulus package could end up causing what people like to call a reverse market crash, where instead of the usual collapse people associate with crashes, we could see an explosion in asset prices, meaning if you like to invest your money, your portfolio, and your 401(k)s could be affected. So in today's video, I want to help explain exactly what this means if you're invested in stocks and bonds and Bitcoin, and how this new round of stimulus will affect everyone. So let's get into it. Hi, my name is Andre J. Hope you're doing well. Come for the finance and stay for the stimulus. Please stimulate that like button so I can continue making these very non-stimulating videos. But to

understand why China is doing this. We have to look at their economy because after the pandemic, China's economy never really recovered. Their real estate sector, which makes up a huge 30% of their economy, is not doing good right now. Developers like Evergrande are collapsing under the weight of their own debt. There's unfinished properties that litter the whole country, and consumers are refusing to spend money because they've lost confidence in the market. And when people stop spending in China, a country where 70% of household wealth is tied up in real estate, it becomes a downward spiral of what's called deflation. In other words, prices start to fall, which sounds good at first, but deflation is like poison for an economy. It discourages spending, incomes stop growing, and companies make less money. And China's economy could have easily turned into a full-blown recession, which is also why the People's Bank of China stepped in and started up The Good Old Money printer. And here's how much money they just printed. First, they lowered

what's called The Reserve requirement ratio for banks by half a percent, and that's estimated to free up about 1 trillion Yuan, or roughly 142 billion US dollars, for new lending. This money is now available for banks to lend to businesses and households, hoping to jump-start the economy. But that's not all. The bank also cut its 7-day reverse repo rate, which is basically the rate at which banks lend money to each other in the short term, and that went down from 1.7% to 1.5%. And I know that doesn't sound like a lot, but it's a big deal because it lowers the cost of borrowing across the economy. Think of it like shaving off a little bit from your mortgage rate, which might not seem like much, but it adds up into billions of dollars in savings across an economy the size of China's. And for consumers, the central bank has announced a half a percentage point reduction in the interest rate on existing home loans. For context, if your bank called you right now to lower

your 30-year mortgage from 6% down to just 5.5% on a $400,000 home loan. You would save approximately $45,000 in total over the life of the loan. Now, for China's economy, it's estimated that this will save $50 million households around 150 billion yuan, which is about 21 billion a year. But wait, there's more to this package. China's also propping up its own stock market because the People's Bank of China announced a 500 billion yuan, roughly 70 billion US, to help institutional investors like their insurers, brokers, and funds to buy more stocks. Essentially, they're making it easier for institutions to access liquidity to prop up the market. And on top of that, China's also introduced a 300 billion yuan, about $42 billion US, worth of a loan program to help companies buy back their own shares. That's like if the Federal Reserve and Papa Po just called up Apple and said, Hey Tim Apple, we'd like to extend to you

a loan at our ultra-discounted interest rate so you could buy up your own stocks. Could you imagine what that would do to the stock market? You don't have to because we've done it before. During the 2008 financial crisis, the US launched its own bailout package, TARP, the Troubled Asset Relief Program, which was a $750 billion effort to stabilize our financial system, which eventually, of course, led to asset inflation in the years that followed. And here's where things get really interesting. The question is, what happens to investors here in the US when another country the size of China starts to stimulate their economy? So first, stimulus packages, aka money printers, typically mean asset values go up, means we're probably going to see stock prices in the US go up as well, even though this is China's money printer turning on. Because historically, every time a major economy rolled out a massive stimulus package, there was a boost to equity markets. And with China's stimulus package, commodities are going up, global growth expectations are changing, and the companies that have exposure to China will probably benefit. If you look

at a commodity-based company. For example, those are up Exxon Mobil at the time of filming this video. For example, is up 4% in one week. And full disclosure, I own some Exxon Mobil in my stock portfolio. It's been an amazing dividend stock. But there's also another one, ticker symbol FCX or Freeport MC, which deals in mining things like gold and copper, which I don't own in my portfolio. But that stock is up 8% in one day and over 133% in one week. That's insane when you remember that stocks are supposed to go up 8 to 10% in a year. And this is not a coincidence. And a big part of why it happens is because of China's new stimulus package. And let's not forget about dividends in times of asset inflation. Companies pass those gains onto shareholders in the form of higher dividends. So if you're holding dividend-paying stocks, especially now that the Federal Reserve has lowered the interest rate by half a percent, that means more

cash from inflated asset prices that could be passed on to shareholders in the form of increased dividend payouts or even share buybacks. And of course, Bitcoin, which I just got a chance to talk about to Michael Saylor recently, is also going up, partially thanks to China's stimulus. Because every time a government steps in with more money, the story around fiat losing its value comes up in Bitcoin. Because it has a fixed supply of 21 million coins, it acts like a universal global vacuum that sucks up all the extra printed money. That's why Bitcoin is also up. So, China could be the reason why Bitcoin goes a lot higher from here, which is also why this video is sponsored by yours truly. I actually just made 40 videos with over 4 hours of training on how to safely protect your Bitcoin. If you don't want to do what I did and lose over a million dollars by keeping your Bitcoin on an exchange, and if you want to learn how to self-custody and protect your Bitcoin with the highest security possible, I'm going to leave a link down below where you can

get my free checklist of what to do. And if you want to dive deeper, you can actually use coupon code Andre 40 to get 40% off at checkout. By the way, you don't actually have to buy anything; you can find most of this training on YouTube for free. But if you like my style of teaching, I think you'll find a lot of value. So, to put this all together, instead of collapsing, I think we could see prices explode. China's stimulus package, which includes interest rate cuts and lowering the amount of money banks need to hold in reserves, and support for China's falling property market, is all designed to pump liquidity into the system and essentially prop up asset prices. Now in China, we're already seeing how the stimulus package is making people with assets richer. The Hang Seng Index, for example, went up over 4% the day the stimulus was announced, which was the best day of the market since 2020. Companies like Alibaba, JD.com, and BYD are already seeing double-digit percentage gains, and this could be just the beginning because it's not just

about China. When China pumps liquidity into its economy, it creates a demand for materials that build stuff like oil and copper and steel. And guess what? The prices of those commodities are also going up. Both copper and aluminum went up over 5% in the last 7 days, all of this within hours of China's stimulus announcement. And historically, when asset prices in one part of the world inflate, we see a spillover into other markets across the world. In 2012, for example, the ECB, the European Central Bank, introduced aggressive monetary policies to stabilize what's called the Eurozone. So, countries like Greece, Spain, and Italy, which were on the brink of default, got rescued that year. The US stock market went up 13.5%. In 2013, Japan introduced fiscal expansion policies and loose monetary policy. Guess what happened to the stock market that year? The S&P 500 went up over 29.5%. The point is that when big economies inject more money into their system, even if it's outside

the US, it has a ripple effect on US asset prices too. Not in all cases, of course, but in many cases when there isn't some Black Swan event and some crazy recession that gets triggered. But if you made it this far, I just want to tie it all together and explain exactly what this means and what I think. So, over the next 6 to 12 months, what I think is going to happen is China will introduce more stimulus because that's what countries love to do to prevent their economies from collapsing. I also think countries from all around the Euro Zone will have their own versions of stimulus, and it'll come in all sorts of different variations, including lower interest rates, lowering the reserve requirements for their banks, AKA how much banks need to have on hand. They'll introduce more liquidity in the system, and overall, I think this will have an inflationary effect on asset prices, meaning things will probably go up in value. Now, I also think this, especially after the election cycle in the next 12 months, once

investors get a little bit more confident with where the economy is going to go. Now that also means if you like to invest your money, I think it's a good sign because you'll probably make more money. But the downside is having more stimulus potentially creates more risk of bubbles forming in the economy. But personally, I'm going to continue to dollar-cost average, and I'm going to continue buying the S&P 500 index. That's the stock market. I'm going to continue reinvesting all my dividends back into my portfolio, and I'm going to continue buying Bitcoin. So for me, nothing's changed. I'll continue to dollar-cost average, which is not a strategy that's going to work for everyone. But because I'm younger and I still have some time left before I retire, I think that's the best strategy for someone in my situation. But I'd love to hear your thoughts about what you think is going to happen, what's happening with China, and what's going to happen over the next 6 to 12 months. And as always, I hope you

have a wonderful rest of your day. Smash the like button. Subscribe if you haven't already. I'd love to see you back here next week. I'll see you soon. Bye-bye.

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China has launched its biggest economic stimulus since the pandemic, with the central bank pumping money into the economy and making loans cheaper, particularly for mortgages.

The stimulus aims to address the country's struggling real estate sector and boost consumer confidence, as 70% of household wealth is tied up in real estate.

The impact of China's stimulus is expected to be felt globally, potentially causing a reverse market crash and affecting investment portfolios worldwide.

China's central bank has cut the reserve requirement ratio for banks, freeing up 1 trillion Yuan for new lending to businesses and households.

The bank also lowered the 7-day reverse repo rate and reduced interest rates on existing home loans, aiming to lower borrowing costs and save households money.

Additionally, China is propping up its stock market with a 500 billion Yuan investment and a 300 billion Yuan loan program for companies to buy back their own shares, potentially impacting global equity markets and benefiting companies with exposure to China.

The Impact of China's Stimulus Package on Stocks and Bitcoin

Exxon Mobil and Freeport MC have seen significant stock gains, with Freeport MC up 8% in one day and 133% in a week, driven by China's stimulus package.

Dividend-paying stocks are benefiting from asset inflation and the Federal Reserve's interest rate cut, leading to increased cash for shareholders.

Bitcoin's rise is also linked to China's stimulus, as its fixed supply of 21 million coins attracts extra printed money, potentially driving its value higher.

China's Economic Stimulus and Its Global Impact

China's liquidity injection is driving up demand and prices for commodities like oil, copper, and steel.

Historically, similar monetary policies in other regions have led to a positive spillover effect on global asset prices, including the US stock market.

The expectation is that China and other Eurozone countries will continue to introduce stimulus measures, potentially leading to an inflationary effect on asset prices in the coming months.

Investor Confidence and Personal Strategy

Investors are becoming more confident in the economy, which could lead to higher returns on investments.

However, increased stimulus may also pose a risk of economic bubbles.

The speaker plans to continue dollar-cost averaging, investing in the S&P 500, reinvesting dividends, and buying Bitcoin, believing this strategy is suitable for their age and time until retirement.