China is preparing for potential economic shifts as the U.S. presidential election approaches. The outcome of the election could have significant economic implications for China.
The scale of China's fiscal stimulus will depend on whether Donald Trump or Kamala Harris emerges victorious. Investors are eagerly awaiting details from the National People's Congress, which is expected to conclude a five-day meeting on fiscal support. Last year's meeting resulted in an increase in the fiscal deficit, setting a precedent for potential announcements this time around.
The size of the fiscal stimulus package could be 10% to 20% larger if Trump wins. Trump has threatened to impose tariffs on Chinese imports, which could further strain China's export sector. In contrast, Harris has not indicated a significant shift from the current administration's policies. China may need to focus on bolstering domestic demand to sustain economic growth in the face of potential trade restrictions.
If Trump wins, there is a higher likelihood of larger domestic stimulus measures and downward pressure on the Chinese yuan. The Chinese government may remain restrained in its approach due to ongoing U.S.-China competition. The primary focus for Chinese authorities is to enhance technology across various sectors. The scale of any stimulus will likely be influenced more by market reactions than by the election outcome itself.
China is contemplating over 10 trillion yuan in debt issuance over the coming years. Local government actions may counteract central stimulus efforts, as they have been enforcing strict tax collection measures. Despite some central government support, local governments may take time to increase spending. The Ministry of Finance is focusing on addressing local government debt issues.
Any additional stimulus is likely to benefit banks rather than directly support consumers. Consumption stimulus may be tied to property market support. The interplay between domestic economic strategies and external pressures from the U.S. will shape China's fiscal landscape in the near future.