The size of China's next stimulus plan depends on the US election, with Trump likely to increase the number due to his aggressive tariff stance.
A Trump victory would mean higher tariffs on Chinese goods, forcing China to increase domestic spending to counter the impact on exports.
China's local governments face budgetary strains and tax enforcement problems, making it difficult to provide broad consumer stimulus.
China’s economy is in a state of flux this week, depending on the upcoming US election. Analysts believe Beijing’s next stimulus package could expand significantly, depending on who wins.
As the Standing Committee of China's National People's Congress (NPC) wraps up its meeting on Friday, just after the US election results are announced, everyone is waiting to see how China's economic strategy will adjust to the new American leadership.
The NPC meeting is expected to announce fiscal support to offset China's growing economic challenges. Last year's meeting saw China increase its fiscal deficit – an unusual move at the time. This year, he faces tougher choices.
If Donald Trump takes office, Nomura China economist Ting Lu predicts China's stimulus package could be 10-20% larger than if Kamala Harris wins. Lu's vision builds on Trump's aggressive stance on trade.
Trump has threatened a 60% increase in tariffs on Chinese imports – possibly even higher, to 200% in a worst-case scenario. This raises the stakes for China, as it would have to boost its domestic economy to offset the loss in trade.
For Harris, the outlook is not that extreme. As deputy dent, she supported measures that restrict China's access to cutting-edge technology, but did not push for the same tariff increases. This means less immediate pressure on China's exports, but technological limitations would still impact China's long-term growth strategies.
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