As Trump's Return To White House, China Plans New Stimulus Package To Protect Economy From US Trade Policies

China is poised to unveil a substantial fiscal stimulus package this Friday, as the National People's Congress (NPC) Standing Committee wraps up its session. This comes in the wake of Donald Trump’s recent election as U.S. president, which has heightened China’s focus on economic strategies.

What Happened: Finance Minister Lan Foan has proposed a significant increase in the debt ceiling for local governments to address hidden debts. The stimulus package may also include special sovereign bonds for major banks and local government bonds to buy unsold properties, South China Morning Post reported on Friday.

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Vice-minister of finance Liao Min has hinted that the package could be substantial, with market estimates ranging from 6 trillion yuan to over 10 trillion yuan. Despite recent economic hurdles, senior officials remain optimistic about meeting a 5% growth target.

Economists like Ding Shuang from Standard Chartered suggest that China “will likely reserve their firepower for next year as growth risks have decreased.” Meanwhile, Larry Hu from Macquarie Group notes that China may wait for clarity on U.S. trade policies under Trump before making additional economic moves.

Why It Matters: The announcement of China’s fiscal stimulus comes amid heightened economic uncertainty following Trump’s election victory. During his campaign, Trump proposed raising tariffs on Chinese imports by up to 60%, potentially reducing Chinese exports to the U.S. by $200 billion and impacting China’s GDP by one percentage point. This has intensified China’s focus on bolstering its economy through fiscal measures.

In October, investor sentiment towards U.S.-listed Chinese stocks was dampened due to the lack of anticipated large-scale stimulus measures. The forthcoming announcement may reignite investor confidence, as Chinese stocks like Alibaba Group Holding BABA, JD.com, Inc JD, and others have shown signs of recovery following Trump’s victory.

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