“Historically, rising commodities have led China’s producer-price index cycle by about six months,” said Hong. “We expect such a correlation to persist. The producers will hire more [employees], consumers will earn more and spend more. Eventually, if everything falls into place, a virtuous price and growth cycle should rejuvenate [the economy].”
Hong, who previously worked for China International Capital Corp and Grow Investment Group, correctly predicted a stock bubble would burst in 2015.
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China breaks ground on world’s largest hydropower dam in Tibet
China breaks ground on world’s largest hydropower dam in Tibet
Beijing’s investment in the Yarlung Tsangpo River project, as well as the anti-involution drive, might convince investors that these two events could further bolster the prospects of Chinese stocks. The Shanghai Composite Index and the Hang Seng Index both reached their highest levels in three and a half years this month, buoyed by easing US-China trade tensions and better-than-expected first-half gross domestic product growth.
The Yarlung Tsangpo project – reminiscent of the Hoover Dam, built on the Colorado River during the Great Depression – sends a signal to investors that further policy support for the economy was imminent, as a boost from trade-in programmes subsidising household appliances and EVs was quickly fading, Hong said.
