Shanghai stocks bounce back, some economists see recovery

Chinese shares moved higher in the last hour of trading on Wednesday to finish the day firmly higher, led by a bounce in technology issues, although trading volumes remained very low.

The Shanghai Stock Exchange’s Composite Index gained 3.38% to end the session at 3,112.66.

On the previous day, Deutsche Bank’s chief China economist, Zhiwei Zhang, noted that fiscal expenditure grew at a 25.9% year-on-year clip in August, following a rise of 24.1% in the prior year.

However, that marked a significant pick-up on the 11.8% expansion seen over the first half of 2015.

Zhiwei believes the acceleration in public outlays confirms the shift on the part of Beijing towards stimulus that began towards the middle of 2015.

While government revenues remain weak the economist still expected to see an improvement in economic activity the fourth quarter, highlighting the “strong pickup in land sales in recent months,” which was already evident.

Acting as a backdrop, analysts at Citi believe there is a 55% chance of some kind of global recession in the next two years or so, originating in emerging markets and China.

"The recession scenario is that of a recession of moderate depth and duration, without a major regional or global financial crisis. We conclude that if the global economy slides into a recession of moderate depth and duration during 2016 and stays there for most of 2017 before staging a recovery," said William Buiter, Citi’s chief economist in a research note sent to clients on 9 September.