China Prepares Big Stimulus, Could Grow Larger If Trump Wins US Election

China’s National People’s Congress Standing Committee, the nation’s top legislative body, gathered on Monday to finalize a long-awaited economic stimulus package that analysts believe could grow if former US President Donald Trump reclaims the White House. The meeting, led by top official Zhao Leji, is expected to approve a trillion-yuan ($140 billion) budget for local governments and banks, alongside measures to offset non-performing loans that have accrued over recent years.

The committee, responsible for legislation and budget allocations, began its session by reviewing draft updates to China’s Arbitration Law, according to state media. Heron Lim of Moody’s Analytics anticipates that the new budget will address “near-term economic issues” through targeted allocations.

In recent months, Beijing has responded to calls for economic support by lowering rates and easing some housing restrictions. However, it has refrained from announcing a total stimulus figure, disappointing investors who expected clearer plans. This week’s session may clarify the stimulus package, with concrete measures anticipated by Friday, aligning with the outcome of the US election.

According to Nomura economist Ting Lu, if Trump wins, China’s stimulus could grow by an additional 10-20%, given Trump’s tough stance on trade with China, including proposed 60% tariffs on Chinese goods. However, Lu notes that China’s primary economic challenges are internal, citing a slump in domestic consumption, housing market instability, and high government debt as threats to the nation’s growth target of 5% this year.

The property sector, once a growth engine, is now heavily indebted, burdening local governments with unsold and unfinished housing units. Resolving these issues could cost up to 3.3 trillion yuan, according to Natixis. Persistent housing woes are stifling consumer spending, as mortgage holders feel stagnant in their financial progress, noted Lim of Moody’s.

China also faces productivity issues due to inefficiencies in its industrial policies and subsidies, said Natixis’ Alicia Garcia Herrero. Efforts to reinvigorate economic productivity and manage debt are expected to be top priorities for the Standing Committee during this week’s legislative discussions.