UBS predicts China to launch fiscal stimulus of up to RMB2 tn yuan soon
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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