China's economy is expected to experience stronger growth than initially anticipated, thanks to significant policy support from the government, according to UBS.

The firm has revised its forecast and now predicts a quarterly GDP growth rate of 6.5% (SAAR) in Q4, following a Q3 GDP growth of 4.6% year-on-year, which exceeded the consensus estimate of 4.4%.

This positive outlook is attributed to improved performance in fixed asset investment and retail sales, as well as new fiscal measures aimed at reducing government arrears and easing local government spending constraints.

UBS now projects China's GDP growth to reach 4.8% in 2024, up from its previous estimate of 4.6%. The anticipated fiscal measures are expected to significantly reduce household interest burdens, potentially resulting in annual cost savings of RMB 150 billion.

However, the analysts caution that a sharp increase in U.S. tariffs, particularly if pro-tariff Republican candidate Donald Trump wins the upcoming election, could pose a substantial risk to China's growth trajectory, potentially pushing it below 4% despite the stimulus efforts.