MARKET OUTLOOK - China May Continue to Be Cautious on Stimulus

In a discussion regarding the impacts of trade restrictions, Homin Lee from Lombard Odier suggested that China could balance many of the shocks originating from the U.S., although he cautioned that this is quite an aggressive assumption. Lee pointed out that there is room for incentives to support consumption and offset potential high tariffs, stating, “This might be sufficient to help them maintain a growth rate of around 4.5%, but when we consider the entire framework for policy, there are many restrictions.” He argued that it makes sense for China to proceed cautiously given the many issues they need to address, adding, “The best thing we might see is perhaps a reasonable counter-cyclical policy using a mix of fiscal and monetary policies.” Looking ahead, Lee does not expect a game-changing stimulus in the next few years, remarking, “The best they could do might be to slightly boost growth around 2025-2026, especially in the face of challenging external conditions.”