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Fixed Income Insights

Macro and sectoral implications of China’s stimulus measures
05 February 2025
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    Key Highlights:

    • China’s recent stimulus measures aim to address domestic economic challenges, stabilising growth and restoring market confidence amid mixed macroeconomic trends and geopolitical risks
    • The measures focus primarily on local-government financing, the stabilisation of the property sector, and the banking sector, all of which are essential for near-term economic stability

    Macro implications of China’s stimulus measures

    Domestically, China’s recent stimulus measures are essential for mitigating immediate threats. They are unlikely to significantly enhance the structural prospects of the economy on their own, but, with appropriate fiscal support, achieving a growth rate of approximately 5 per cent in 2025 remains attainable.

    Sectoral implications of these economic policies

    The recent stimulus measures highlight the critical interconnections between local-government financing, the stabilisation of the property sector, and the resilience of the banking system. A significant RMB 10tn debt swap has been initiated to alleviate local-government fiscal stress, while efforts to stabilise the property market are essential given substantial unsold inventory. Furthermore, the recapitalisation of major state-owned banks, which are heavily exposed to real-estate loans, is a key aspect of these policies. While the measures may have a less pronounced impact in other sectors, they warrant investigation within the context of an active investment approach in the region.