Investment bank UBS Group AG (UBS) anticipates that China will soon implement significant fiscal stimulus measures, ranging from RMB1.5 trillion to 2 trillion yuan.
Wang Tao, Chief China Economist of UBS, noted in a report that market expectations for the size of China's fiscal stimulus vary widely, from RMB2 trillion to 10 trillion yuan, which is equivalent to 1.6-8% of GDP.
Wang believes that a more moderate package of RMB1.5 to 2 trillion yuan in the short term is more feasible. This approach would help achieve the economic growth target of around 5% for this year, with an additional fiscal expansion of RMB2 to 3 trillion yuan still expected next year based on earlier forecasts.
Wang argues that to stabilize the real estate market in the coming quarters or offset the drag from a sluggish property sector, and reverse the downward spiral in prices, and corporate, and consumer confidence, a significant increase in stimulus measures and additional structural reforms are necessary to aim for near 5% growth over the next two years.
UBS expects that this year's stimulus measures may be announced after the National Day holiday or around the release of third-quarter economic data on Oct. 18. Decisions on next year's measures are likely to be made around the Central Economic Work Conference in Dec.
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