China prepares major stimulus amid economic challenges and potential trade war

China is getting ready to announce a significant stimulus package to revive its struggling economy. This move is in response to the economic challenges the country is facing, including the potential trade war with the incoming U.S. administration.

Stimulus Package to Address Non-Performing Loans

The stimulus package is expected to target local authorities and banks to address the issue of non-performing loans. The government is considering increasing local government debt ceilings to facilitate the purchase of vacant land and unfinished real estate projects.

Resilience in the Chinese Economy

Despite the challenges, there are signs of resilience in the Chinese economy, with a rebound in factory activity and a surge in exports. However, experts caution against relying too heavily on exports and advocate for a more proactive fiscal policy.

Potential Impact of Proposed Tariffs

The potential impact of proposed tariffs by the U.S. is a concern, and economists suggest that a significant stimulus package is more likely with a Trump victory. However, accumulating additional debt could destabilize financial markets.

Uncertain Market Response

The market's response to the announced economic stimuli remains uncertain. Looking ahead, fiscal policy is expected to play a more prominent role in driving growth, and a balanced approach is crucial for stabilizing the economy and achieving long-term growth objectives.

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