The Fortescue Ltd (ASX: FMG) share price has fallen more than 7% over the past two days amid disappointment over China's latest stimulus announcement.
The Fortescue share price is currently sitting at $18.11, down 0.06% on Tuesday and down 7.37% since Friday's close.
Other ASX iron ore shares are also lower this week.
The BHP Group Ltd (ASX: BHP) share price is down 5.78% since Friday's close. Rio Tinto Ltd (ASX: RIO) shares are down 4.84% and Champion Iron Ltd (ASX: CIA) shares are down 9.44%.
The falls come amid the iron ore price slipping 1.33% to US$103.82 per tonne overnight.
Why is the Fortescue share price weak?
On Friday, China announced a 10 trillion yuan debt package to help its local governments with financing.
The package includes raising the overall debt ceiling for local governments and allowing them to raise more debt through the issuance of special bonds.
According to Reuters, the new funds will help repay high debt accumulated through local government financing vehicles (LGFVs) during a time of falling revenue, largely due to the property market slowdown.
Revenue is falling for many reasons, including developers no longer buying land from local councils.
This has led to local governments cutting civil servants' pay and delaying payments to contractors, impacting the real economy and contributing to weak consumer consumption and price deflation.
This debt package is a different type of stimulus than we are used to seeing from China.
In the past, Chinese stimulus has directly led to more urbanisation and the construction of infrastructure.
In turn, this has meant higher demand for iron ore for steel-making, pushing up the iron ore price and providing tailwinds for the Fortescue share price and other iron ore stocks.
In late September, China announced broader economic stimulus measures that prompted an immediate rally in ASX 200 iron ore stocks. The Fortescue share price leapt 1.75% on the day of the news.
Since then, no further stimulus that would benefit ASX iron ore stocks has been announced.
Reuters reported that China's Finance Minister Lan Foan said more stimulus would be coming.
However, it's unclear whether any further stimulus measures would directly benefit commodity prices.
Reportedly, there are plans afoot to repurchase unused land from developers and roll out subsidies to help factories upgrade their equipment and to incentivise households to upgrade their appliances.
None of these stimulus plans carry any discernable benefit for ASX iron ore shares like Fortescue.
What about the Trump factor?
Many analysts say Donald Trump's election as US President presents a new risk to the Chinese economy.
One of Trump's key policy promises is a 60% tariff on Chinese goods and a 10% to 20% tariff on imports from other countries.
A 60% tariff may further weaken the Chinese economy, which could have flow-on effects on Australia in the form of lower demand for our commodities and reduced export earnings.
In 2023, Australia's iron ore export earnings to China, our biggest buyer, totalled $115.6 billion.
By comparison, our second-biggest buyer, Japan, bought $8 billion worth of iron ore.
However, Fortescue executive chair Dr Andrew 'Twiggy' Forrest AO says he isn't worried.
Forrest said China had enormous capacity to stimulate its economy further if required.
"The amount of horsepower in the tank of China's economy and their ability to self-stimulate is phenomenal …," Forrest said.
