A flag stall at the Yiwu Wholesale Market in Zhejiang Province, China, on May 10, 2019.
Aly song | Reuters
BEIJING – The size of China’s long-awaited stimulus plans will likely depend on the outcome of the U.S. presidential election, analysts said.
Investors expect Beijing to announce details of fiscal support on Friday. That’s when the standing committee of the National People’s Congress – China’s parliament – will conclude a five-day meeting. The same meeting last year oversaw a rare increase in the budget deficit.
This year, the timing of the meeting means all details will be announced just days after the US elects Republican candidate Donald Trump or Democratic rival Kamala Harris as the next president. The polls close on Tuesday local time.
“The size of China’s fiscal stimulus package would be about 10 to 20% larger under a Trump win than under the Harris win scenario,” Ting Lu, chief China economist at Nomura, said in a note last week.
He warned that most of the challenges for China are domestic, although there will be some impact from the US election outcome.

Trump has threatened to raise tariffs on U.S. imports from China by 60% — or even reportedly 200% in an extreme scenario. Harris, currently vice president, has not yet signaled a wholesale departure from the Biden administration’s approach to limiting China’s access to advanced technology.
More tariffs would hit Chinese exports, a bright spot in an economy struggling with a real estate sector slump and tepid consumer demand.
Increased trade restrictions should mean China will have to rely more on domestic demand to boost growth, Zhu Bin, chief economist at Nanhua Futures, said in a video presentation last week. This is evident from a CNBC translation of his comments in Mandarin.
“We can be sure of one thing beyond any doubt: if Trump wins the election, China’s domestic stimulus will only be bigger, not smaller,” Zhu said. He expects Trump to have a better chance of winning, which he said would increase downward pressure on the Chinese yuan against the US dollar.
Political analysts debate whether China’s relations with the US would be the same better under Trump or Harris.
“I’m thinking right now, probably from China’s point of view, about a potential President Harris [makes it] It is easier to anticipate what policies are likely to emerge,” said Liqian Ren, leader of quantitative investments at WisdomTree.
That does not mean that Beijing will provide large-scale support. Chinese authorities are “constrained by the competition between the US and China, so the number one priority is to be able to upgrade technology across the board,” she said. “I think as long as that is your goal, the government’s willingness to stimulate will still be tepid.”
Ren expects that the size of the stimulus measures will not be determined by who wins the election, but by the stock market reaction.
Market volatility in China, but not in the United States, will likely make “China feel more obliged to counteract this volatility,” she said. Unlike three or four years ago, Ren says, volatility in China’s stock market today has a greater impact on economic confidence.
Chinese shares have tempered their gains in recent weeks after surging in late September. Chinese President Xi Jinping led a high-level meeting on September 26 calling for strengthening support for fiscal and monetary policies and halting the decline in the real estate sector.
Although the People’s Bank of China has cut interest rates, the Ministry of Finance has not yet released details on the widely expected fiscal stimulus measures. Finance Minister Lan Fo’an last month hinted at a rise in the budget deficit and indicated that any changes would have to go through an approval process before being announced.
How big?
Analyst forecasts for additional debt issuance vary. China is considering issuing more than 10 trillion yuan in debt in a few years, Reuters reported on Tuesday, citing sources.
Chinese authorities may not announce a specific figure, but if they do, it should be more than 4 trillion yuan, given the amount spent in the wake of the 2008 financial crisis, said Zong Liang, chief researcher at the Bank of China. He expects that the deficit could be expanded above 4%.
The Chinese government has set a deficit target of 3% for this year, after raising it to 3.8% at the end of last year.
WisdomTree’s Ren said her analysis of official statements, media reports and investment notes showed that stimulus expectations are inherently about the same. Whether it is 10 trillion yuan over three to five years, or 2 trillion yuan in one year, the average is about 2 trillion yuan per year, she pointed out.
Consumption is still questionable
“I think people are focusing a lot on the top line number right now,” Ren said. ‘But they are missing [how] the local government, they do a lot of things that are actually opposite[ing] incentive.”
She noted that local authorities in some areas have enforced tax collection so strictly that they have discouraged business activity. Despite some support from central government, she expects it will “probably be quite some time” before local authorities “feel like they have money to spend”.
Dozens of companies in China disclosed in stock exchange filings this year that they had received notices from local authorities as far back as 1994 to repay taxes related to their operations. Local governments once depended on land sales to real estate developers for their revenues.
The Ministry of Finance has emphasized on tackling the debt problems of local governments. Analysts have pointed out that additional stimulus is also likely to go to banks, and not directly to consumers.
The consumption boost at this stage may come more from real estate support, Citi analysts said in a report on Friday. “That said, we believe that more decisive consumption support could still be a realistic option under more adverse tariff scenarios.”