An official from the People’s Bank of China announced plans to help financial institutions increase credit for the service sector. They will also make the approval process for consumer loans quicker. Chinese regulators stressed that lenders should be careful with subsidy funds. It’s crucial to ensure these funds are not diverted to areas outside of consumer spending.

Supporting Service Consumption

An official from China’s Ministry of Commerce mentioned that supporting service consumption is essential for boosting domestic demand and creating jobs. Recent statements from China have positively affected foreign exchange markets. The message from Chinese officials is clear: when economic data weakens, expect policy support. The latest retail sales figures for July 2025 showed only a 2.7% growth, which was less than expected. This effort to promote consumer loans is a direct response to that data. It suggests a potential short-term boost in risk appetite driven by China. For currency traders, this news makes long positions on the Australian dollar (AUD) appealing. The AUD/USD exchange rate, which has been around 0.6450, tends to rise when China’s stimulus is expected. We might consider buying call options on the AUD/USD pair that expire in the next few weeks to capitalize on a possible rise. Historically, such announcements often lead to a temporary increase. For instance, in late 2023, hints of stimulus helped the Aussie dollar gain over 4% in the following month. With currency options currently showing low implied volatility, entering this trade is relatively affordable.

Industrial Commodity Prices

This initiative should also help stabilize industrial commodity prices, especially copper. Recently, copper prices dipped below $8,300 per metric ton due to concerns about global manufacturing. Even though this stimulus focuses on services, better consumer sentiment in China can have positive effects across the board. However, caution is necessary when investing in commodities. Officials emphasized that funds should not flow into real estate, a significant issue that worsened from 2021 to 2023. A smart strategy would be to use call spreads on copper futures to manage risk. We should also look at Chinese stock markets, particularly in the consumer discretionary sector. The Hang Seng Consumer Discretionary Index has not performed well this year, making it react strongly to positive news. Buying call options on a broad China ETF like FXI could offer a straightforward way to benefit from a potential relief rally. Create your live VT Markets account and start trading now.

here to set up a live account on VT Markets now