China Set to Announce Major Fiscal Stimulus Amid U.S. Policy Shifts Under Trump

During his campaign, Trump proposed raising tariffs on Chinese imports, potentially reducing Chinese exports to the U.S.and impacting China’s GDP.

The Latest: China is preparing to unveil a significant fiscal stimulus package this Friday, coinciding with the conclusion of the National People’s Congress (NPC) Standing Committee session. This move comes amid heightened economic focus following Donald Trump’s recent election as U.S. president, which has prompted China to refine its economic strategy.

What’s Expected: Finance Minister Lan Foan has proposed raising the debt ceiling for local governments to address undisclosed debts. According to a report from the South China Morning Post, the stimulus package may feature special sovereign bonds for major banks and local government bonds aimed at purchasing unsold properties.

Vice-minister of finance Liao Min hinted that the stimulus could be substantial, with projections ranging from 6 trillion to over 10 trillion yuan. Despite recent economic challenges, senior officials are optimistic about achieving a 5% growth target.

Economic Perspective: Economists are weighing in on the implications. Ding Shuang from Standard Chartered believes China may “reserve their firepower for next year as growth risks have subsided.” Meanwhile, Macquarie Group’s Larry Hu suggests China may wait for more clarity on U.S. trade policies under Trump before introducing additional measures.

Why It Matters: The timing of China’s fiscal boost comes as Trump’s trade policy proposals create uncertainty. During his campaign, Trump suggested raising tariffs on Chinese imports by up to 60%, potentially decreasing China’s exports to the U.S. by $200 billion and shaving a full percentage point off China’s GDP. This possibility has underscored China’s need for proactive fiscal policies to sustain its economic stability.

Chinese stocks listed in the U.S., like Alibaba Group (BABA) and JD.com (JD), experienced mixed investor sentiment in October as anticipated large-scale stimulus measures were delayed. This upcoming stimulus announcement could rekindle investor confidence and support a rebound in these stocks following Trump’s win.