This is when China is likely to present new 'significant fiscal stimulus' plan: DB

December 03, 2024 03:13 AM AEDT | By Investing

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This is when China is likely to present new 'significant fiscal stimulus' plan: DB

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Investing.com -- Deutsche Bank analysts anticipate that China will unveil a "significant fiscal stimulus" package in March 2025, coinciding with the announcement of a 4.5% growth target.

This stimulus, which could include "direct government spending, bank recapitalization, and further support for the property sector," will aim to reinforce domestic demand amid economic uncertainties, according to the bank's analysts.

They explained that China's growth momentum has recently stabilized due to decisive government policies, but two major questions linger: the future of its property sector and the escalation of trade tensions.

According to Deutsche Bank (ETR:DBKGn), the property market is expected to "muddle through" next year. While home prices may continue to decline, they believe the pace will likely slow, with modest growth in new-home sales as affordability improves and policy support strengthens.

On trade tensions, Deutsche Bank projects phased tariff hikes by the U.S., with a 10% increase in the first half of 2025 followed by another 10% in the second half.

The bank says these measures could reduce China's GDP growth by 0.5% over 2025-26 but will be partially offset by trade adjustments and currency flexibility.

To support growth, the People's Bank of China is expected to "cut the policy rate by another 20bp and support credit growth through RRR cuts (100bp in total), government bond purchases, and structural lending facilities."

Deutsche Bank forecasts average annual growth of 4.8% in 2025 and 4.6% in 2026, with domestic demand strengthening while external demand weakens. Quarterly growth is projected to decelerate from above 5% in Q1 2025 to 4.3% in Q4 2025 before rebounding.

While stronger policy support or a 5% growth target could present upside risks, Deutsche Bank believes challenges such as a deeper property downturn or intensified trade tensions remain key concerns for China's economic outlook.

This article first appeared in Investing.com

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