The two newest residents of the San Diego Zoo are now accepting visitors…

As I wrote two months ago, pandas Xin Bao and Yun Chuan arrived in California in June. Since 1972, China has loaned out pandas to American zoos to bolster international relations.

China’s ambassador to the U.S., Xie Feng, foreshadowed the pandas’ diplomatic significance when they debuted…

We hope the arrival of the pandas will inject fresh impetus into exchanges between China and California and help stabilize the broader bilateral relationship as well.

Xie spoke of strengthening “exchanges” and “stabilizing” broader relationships…

Those words carry a lot more weight now. Today, China is shoring up its economy in a big way. And among other things, it’s likely hoping to court Western investors.

Several weeks after the pandas’ debut, China announced a new fiscal regime… And it could be a “back up the truck and buy” moment for the country’s stock market.

Let me explain…

The governor of the People’s Bank of China (“PBOC”), Pan Gongsheng, held a press conference in Beijing two weeks ago.

The governor’s statement was direct and to the point. But his announcements added up to a massive fire hose of stimulus for the Chinese economy.

Some of the policy decisions included…

  • A decrease in the reserve requirement ratio for Chinese banks. This means lenders will be allowed to keep less cash on hand – which means they can invest more in the economy.
  • A roughly 0.5 percentage-point reduction of existing mortgage rates. This would put about 150 billion yuan ($21.4 billion) back into the Chinese consumer’s pocket.
  • A 500 billion yuan ($71.3 billion) fund for brokerage houses, mutual funds, and insurance companies to buy Chinese stocks on the open markets.
  • A 15% reduction in the minimum down payment required from new homebuyers.

The announcement has already made waves in the stock market. Chinese stocks have gone from flat to one of the best-performing assets of the year. We can see it by looking at the KraneShares MSCI All China Index Fund (KALL)...

This fund tracks a market-cap-weighted basket of large- and mid-cap Chinese stocks. And it acts as a good stand-in for Chinese stocks.

KALL exploded higher last month. Take a look…

Chinese stocks have now rocketed an astonishing 35% higher this year… And most of it happened in the wake of last month’s fiscal announcement.

That’s better year-to-date performance than the S&P 500 Index (at 20%), the Nasdaq Composite Index (at 19%), and even gold (at 29%).

In short, China’s new fiscal plan represents a huge step forward. It shows a genuine effort to change how investors feel about taking on risk in China. And the evidence suggests this is only the beginning.

For example, China has stubbornly pegged its GDP growth projections at 5% for the year. That’s a notch above most forecasts…

For example, a quarterly survey by Nikkei published last week revealed a consensus of 4.8% GDP growth among Chinese economic experts. And in the world’s second-largest economy, the difference is the equivalent of about $36 billion in U.S. dollars.

The PBOC also left the door open to the possibility of further stimulus “depending on the future situation.”

In short, Beijing’s policy reversal is barely two weeks old… But it has already led to a stratospheric rally in mainland-Chinese stocks. The move has signaled to investors that it’s time to buy.

This is likely just the beginning… Add China to your portfolio today, before it climbs even higher.

Good investing,

Sean Michael Cummings

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Source: Daily Wealth