TD Securities On Chinese Fiscal Rumours

TD Securities write “rumours of an incoming fiscal bullet from China marks a positive turn in authorities' approach to boost the economy after relying mostly on monetary and property stimulus measures in the past few months.”

• “The central government is likely aware of local governments fiscal conditions and is ready to do the heavy lifting by taking on more fiscal debt given that the leverage of China's central government is low compared with other advanced economies.”
• “By our estimates, a CNY1tn boost in fiscal support should add ~1%-pt to GDP growth which would bump our 2024 GDP forecast to 5.4% (current: 4.4%).”
• “We project that most of the fiscal boost would benefit growth more next year as we are in the final quarter of the year and there could be delays from the fiscal execution.”
• “Perhaps, the Third Plenum of China’s 20th Central Committee which occurs this month may present itself as an ideal platform for authorities to give greater details of the fiscal plan to help drive growth for 2024.”
• “Recall that past Third Plenums were typically an avenue for the leadership to spell out China’s economic reform agenda and there could be structural economic reforms that may accompany any fiscal support plan.”