Just because we’ve seen this page from the play book before and just because I’m skeptical about the long-term effects of this policy doesn’t mean I don’t want to own the China rally now. On Monday March 24, I added the iShares China Large-Cap ETF (FXI) to my Perfect Five ETF Portfolio on my subscription site JubakAM.com, to my Jubak Picks Portfolio here, and to my Volatility Portfolio on JubakAM.com. (In the Perfect Five ETF portfolio I’m replacing my India ETF with this China ETF.)
At the March 5 opening of Two Sessions or Lianghui, the popular name for the back-to-back meetings of two of China’s major political bodies, the Chinese People’s Political Consultative Conference (CPPCC) and the National People’s Congress (NPC), Premier Li Qiang delivered the highly anticipated 2025 Government Work Report.
The detailed policy roadmap for the year ahead marked a major escalation of the government’s efforts to boost growth in China’s economy.
Li affirmed, as expected, the government’s 5% GDP growth target and laid out the following priorities:
The government aims to increase people’s incomes and wealth by extending subsidies to companies that maintain employment levels, help the unemployed upgrade their skills, and support farmers in monetizing their resources.
The government plans to increase spending and to issue 1.3 trillion yuan in ultra-long-term bonds, an increase of 300 billion yuan from 2024. The report details plans to increase the fiscal deficit to around 4%, up 1 percentage point from 2024. The plan also includes efforts to support hard-pressed local governments with increased local government debt earmarked for infrastructure development and land acquisition. The planned 4.4 trillion yuan is an increase of 500 billion yuan from 2024.
The government set a target to create over 12 million urban jobs, aiming for an urban unemployment rate around 5.5%.(Please note that China’s urban unemployment rate does not count migrant workers who remain officially in residence in their native villages.)
The government will encourage the replacement of consumer goods like appliances and vehicles with subsidies, credits, and discounts.
The government will offer incentives to raise the birth rate and will set up childcare subsidies.
The government will increase pensions and medical benefits to support consumer spending.
Importantly, the first key task in the 2025 government work report focused on boosting consumption, enhancing investment efficiency, and expanding domestic demand. The goal is to make domestic demand the primary driver of economic growth by addressing consumption weaknesses and integrating consumption with investment. The report highlights several key measures to improve consumer purchasing power, increase high-quality supply, and enhance the consumer environment. These include improving the buying power of low-income residents by boosting income growth and reducing burdens for low- and middle-income groups while improving the normal wage growth mechanism for workers.
It remains to be seen whether or not a top-down centralized command economy can successfully grow a bottom up consumer economy.
But that’s a discussion for another day and another investment time frame.
In the present moment, the iShares China Large-Cap ETF (FXI) is up 20.11% for 2025 through the close on March 21. The portfolio is heavily weighted toward China’s big consumer, Internet, and AI stocks with big positions in Alibaba, Tencent, Meituan, and JD.com. The ETF pays a 2.37% yield. The expense ratio is 0.74%.
Besides the argument to buy Chinese stocks when the government announces stimulus, I think Chinese assets benefit from global cash flows right now as investors look for ways to reduce their exposure to U.S stocks.
