US-listed China stocks moved higher upon an announcement from the Chinese government of a new stimulus package. According to Bloomberg, the Chinese government is looking to use state-owned companies' funds to stabilize the market with a package worth $278 billion ( equivalent to 2 trillion Chinese yuan).

Jeffrey Kleintop, Charles Schwab Chief Global Investment Strategist, joins Yahoo Finance to discuss China's announced stimulus package and the impacts it may have on markets and investor sentiment:

"The real issue is turning around consumer sentiment, not even stock market sentiment, within China. It's this weak private sector demand while homebuyer deposits remain at risk in the form of the liabilities of failing developers. Remember, you put down 30 to 50% in cash when you want a developer to start building your house in China, and now, the troubles with those developers mean some of those deposits could disappear and that's what consumers are worried about — A big loss of their lifetime savings. "

For more expert insight and the latest market action, click here to watch this full episode of Yahoo Finance Live

Editor's note: This article was written by Nicholas Jacobino

Video Transcript

[AUDIO LOGO]

BRAD SMITH: Well, China ramping up stimulus this week. The People's Bank of China cutting the reserve requirement ratio, reducing the amount of cash that banks are required to hold in reserve, sending shares of US-listed Chinese stocks higher this week. But is this enough to help China's struggling economy.

We turn to Jeffrey Kleintop, Charles Schwab Chief Global Investment Strategist, to tell us more. Jeffrey, is it is it that alone? I mean, there's also been some short covering as well. What do you believe is perhaps most pronounced within the tape-- within some of the Asia-Pacific but greater China-specific stocks?

JEFFREY KLEINTOP: I guess the size of the reserve rate cut. The reserve ratio cuts for banks have typically been 25 basis points over the last couple of years. So this is a 50 basis point cut to 10% for the largest banks. That's pretty big. I think the last time we saw that was in 2021 in response to the pandemic and the global slowdown we saw then.

But when it comes to spurring demand in the economy, I think the cut is going to have limited effectiveness on its own. The PBOC's move does release significant liquidity to banks, which should help the banks support infrastructure spending and maybe affordable housing this year. But lower rates or more credit availability isn't China's problem. In fact, it may only worsen its ongoing battle with deflation, which is weighing on demand and profit growth.

SEANA SMITH: And Jeffrey, taking that into account, it sounds like then to say the least, this rally that maybe we're seeing expect to be a bit temporary. I think the question, though, for investors is what that bottom looks like for the Chinese market. Have we seen that yet? Have we-- or, I guess, what more specifically do you think that downside risk could look like?

JEFFREY KLEINTOP: Well, the real turnaround, the real issue is turning around consumer sentiment and not even stock market sentiment within China. It's this weak private sector demand, while home buyer deposits remain at risk in the form of the liabilities of failing developers.

Remember, you put down 30% to 50% in cash when you want a developer to start building your house in China. And now the troubles with those developers mean some of those deposits could disappear. And that's what consumers are worried about, a big loss of their lifetime savings.

So reviving growth and confidence will require some type of explicit government guarantee of those home buyer deposits at those developers. Now, there may be more efforts by policy makers in the weeks ahead leading up to the start of the National People's Congress on March 5.

In the meantime, China's efforts to prop up its stock market with some buying-- and investors were calling the 60% jump. That's 60 jump in Chinese stocks during the three months that followed the end of lockdowns in late 2022. We need to remember that all the efforts that China has put in place over the last year or so have been short-lived and quickly reversed in the stock market with further declines.