China: fiscal stimulus will avoid severe global repercussions

In Kürze

China has faced growing concerns about slowing growth and the risk of deflation. After a piecemeal approach, the Chinese authorities have made a U-turn by unveiling a coordinated monetary and fiscal stimulus.
  • The prolonged slowdown and deflationary environment in the Chinese economy has raised concerns about the potentially significant global impact. The risk of punitive US tariffs in case of a Trump victory may are adding to the risks.
  • Stronger and coordinated policy support are on the way, but the scars of the crisis still have a structurally dampening effect. A focus on downside risks is therefore useful. Similarly, the promise of significant fiscal support has led to high expectations. A possible Trump win is another clear downside.
  • We simulate the impact of a deep domestic downturn, with Chinese GDP lower by 1.5% than the baseline next year, which the government tries to counter by cutting export prices and another one in which , by raising public investment significantly, the government boost GDP by 1%. We measure the impact on GDP and inflation for the largest economies and EMs. 
  • The reaction of EM assets will be heterogeneous in both scenarios. In a negative scenario, EM FX would be the most vulnerable, with LatAm commodity exporters and open economies in Asia on a back foot. In a positive scenario, local and external debt should benefit equally, while EM FX in the most open economies would outperform.

Download the full publication:

China: fiscal stimulus will avoid severe global repercussions

This document is based on information and opinions which Generali Asset Management S.p.A. Società di gestione del risparmio has obtained from sources within and outside of the Generali Group. While such information is believed to be reliable for the purposes used herein, no representation or warranty, expressed or implied, is made that such information or opinions are accurate or complete. The information, opinions estimates and forecasts expressed in this document are as of the date of this publication and represent only the judgment of Generali Asset Management S.p.A. Società di gestione del risparmio and may be subject to any change without notification. It shall not be considered as an explicit or implicit recommendation of investment strategy or as investment advice. Before subscribing an offer of investment services, each potential client shall be given every document provided by the regulations in force from time to time, documents to be carefully read by the client before making any investment choice. Generali Asset Management S.p.A. Società di gestione del risparmio may have taken or, and may in the future take, investment decisions for the portfolios it manages which are contrary to the views expressed herein. Generali Asset Management S.p. A. Società di gestione del risparmio relieves itself from any responsibility concerning mistakes or omissions and shall not be considered responsible in case of possible damages or losses related to the improper use of the information herein provided. It is recommended to look over the regulation, available on our website www.generali-am.com. Generali Asset Management S.p. A. Società di gestione del risparmio is part of the Generali Group which was established in 1831 in Trieste as Assicurazioni Generali Austro Italiche.

Picture

© Generali Investments, alle Rechte vorbehalten. Diese Website wird von der Generali Investments Holding S.p.A. als Holdinggesellschaft der wichtigsten Vermögensverwaltungsgesellschaften der Generali Gruppe zur Verfügung gestellt, die direkt oder indirekt die Mehrheitsbeteiligung an den unten aufgeführten Gesellschaften hält (im Folgenden gemeinsam "Generali Investments"). Diese Website kann Informationen über die Tätigkeit der folgenden Gesellschaften enthalten: Generali Asset Management S.p.A. Società di gestione del risparmio, Infranity, Sycomore Asset Management, Aperture Investors LLC (einschließlich Aperture Investors UK Ltd), Plenisfer Investments S.p.A. Società di gestione del risparmio, Lumyna Investments Limited, Sosteneo S. p.A. Società di gestione del risparmio, Generali Real Estate S.p.A. Società di gestione del risparmio, Conning* und unter deren Tochtergesellschaften Global Evolution Asset Management A/S - einschließlich Global Evolution USA, LLC und Global Evolution Fund Management Singapore Pte. Ltd - Octagon Credit Investors, LLC, Pearlmark Real Estate, LLC sowie Generali Investments CEE. *Einschließlich Conning, Inc, Conning Asset Management Limited, Conning Asia Pacific Limited, Conning Investment Products, Inc, Goodwin Capital Advisers, Inc. (zusammen "Conning").