China is likely to post stronger-than-expected annual growth, supported by Beijing’s willingness to provide much-needed policy support including fiscal and other supportive measures, although any potential sharp tariff hike from the US poses a major threat, UBS analysts said.
“Given stronger-than-expected third-quarter GDP growth and the recently announced policy initiative, we now expect fourth-quarter GDP growth to accelerate to 6.5% (SAAR),” UBS said in a note on Friday after raising its forecast for China’s economic growth.
UBS now expects China’s gross domestic product (GDP) to grow 4.8% in 2024, up from a previous forecast of 4.6%, citing better-than-expected third-quarter economic data and a raft of new policy measures announced since late September.
China reported real GDP growth of 4.6% year-on-year in the third quarter, slightly better than the consensus estimate of 4.4%, underpinned by improved performance in September in fixed asset investment and retail sales.
The more optimistic forecast for China is also supported by Beijing’s willingness to continue to implement policies to reduce government arrears, ease restrictions on local government spending and cut mortgage interest rates, which UBS estimates could reduce household interest burdens by RMB 150 billion per year.
“The additional fiscal resources are likely to generate a stronger positive fiscal impulse in the fourth quarter than we had assumed in our earlier forecast,” UBS added.
Beyond China, however, the outcome of the US election could offset even a major fiscal bazooka from Beijing, especially if tariff-friendly Republican presidential candidate Donald Trump wins.
In the event of a sharp US tariff hike, China’s growth could fall below 4% “even with major policy stimulus,” UBS said.
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Reference;
Ebrahim, Y. (2024) China set for stronger growth amid policy push, but US tariffs remain wildcard:UBS By Investing.com, Investing.com. Investing.com. Available at: https://www.investing.com/news/economy-news/china-set-for-stronger-growth-amid-policy-push-but-us-tariffs-remain-wildcardubs-3671529 (Accessed: 19 October 2024).
