Bernard Arnault, the billionaire owner of LVMH, experienced a significant increase in his wealth of $17 billion in just one day following China’s announcement of fresh stimulus measures to boost economic growth. This jump in wealth comes after a turbulent period where Arnault lost $24 billion due to a market slump in high-end goods. With China and Hong Kong stocks also experiencing a surge, it marks their best weekly performances in 16 years, indicating a positive response to the stimulus measures and leadership from China.
LVMH, which reported a 10% drop in sales in the first half of the year in the Asia region compared to the previous year, is heavily reliant on the Chinese market. China’s faltering economy has had negative effects on many Western brands, with challenges such as sluggish consumer spending and a debt crisis in local governments. Economists had been urging Chinese officials to take more decisive action to boost the economy, and this week’s announcements and actions have shown a response to those calls with a determined effort to stimulate growth.
Investors are optimistic about China’s economic prospects following the announcement from the Chinese leadership focusing on economic issues at a monthly meeting. The dedication to implementing counter-cyclical fiscal and monetary policies, supporting low- and middle-income citizens, and improving the property market has been well-received by investors. Measures such as rate cuts and reserves requirement ratio reductions have been implemented to support businesses, freeing up money for lending and providing relief to the struggling property sector.
Despite the positive response from investors, experts are urging caution as officials still need to find solutions to stabilize the property market, which has been a significant factor in China’s economic challenges. The property market, which once accounted for a large portion of economic activity, has been declining since 2019 due to government regulations on developer borrowing. The reduction in mortgage rates and downpayments for homebuyers is a step towards reviving the sector, but more sustainable measures will be needed to ensure long-term stability.
Overall, China’s swift action in rolling out stimulus measures has had a significant impact on the economy, with positive reactions seen in both stock markets and investor confidence. The focus on boosting economic growth, supporting businesses, and addressing key challenges like the property market demonstrates a commitment to addressing the country’s economic woes. It remains to be seen how these measures will play out in the long term and whether they will lead to sustained growth and stability in the Chinese economy.
