Global investors fleeing China have one simple message for the country's leadership: put prudence aside for a short while, and start spending big.
As they go from hope to disappointment and now capitulation, investors are losing patience with what they see as incoherent, slow and stingy measures by China to revive its sputtering economy and defuse a deepening property crisis.
"The only way out is to step up fiscal stimulus … because there is a lack of confidence, rate cuts are not doing enough to boost credit demand." Zhao finds the lack of a policy response to the weakening economy an "eerie reprisal of China’s stubborn zero-Covid policy", which lasted three years before being suddenly dismantled last December.
"To have a significant impact, to be a game changer for the economy, I think you will have to raise that by multiples of that amount," Ducrozet said, referring to last year's fundraising. UBS Bank estimates China's total government debt was 111 trillion yuan in 2022, the bulk of which is owed by struggling provincial governments. Yet, overall debt at 92% of what is the world's second-biggest economy is smaller than that in Japan or the United States.
Yan Wang, chief emerging markets and China strategist at Alpine Macro, says housing policies have eased but still aren't stimulative, given high down payment requirements and even interest rates. Commercial banks should be subsidised for lowering mortgage rates, he says.
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