Nomura: Balance Sheet Damage Is Not The Major Drag, Beijing's Fiscal Stimulus Is No Panacea

Nomura write “like Japan, the unprecedented collapse of the property sector has damaged the balance sheets of Chinese developers, local governments, households and banks to varying degrees.”

• “Unlike Japan, the overall damage to Chinese entities’ balance sheets is limited. Moreover, those with damaged balance sheets are not aggressively paying down their debt. The difference between China and Japan matters for policy solutions.”
• “China’s current economic woes are rooted in sapped confidence in domestic investment returns and rising worries over geopolitical tensions. We believe ramping up fiscal spending alone is far from enough to solve China’s problem, as “crowding out effects” and “after-effects” are real risks that cannot be simplistically assumed away.”
• “The best policy package should be a mix of measures that can bolster aggregate demand, efficiently allocate capital and boost the confidence of the domestic private sector and foreign investors.”