US election could shape China’s long-awaited fiscal stimulus package: analysts

The outcome of Tuesday’s US presidential election is expected to shape the scale of China’s long-awaited fiscal stimulus package, with a victory for former president Donald Trump likely to prompt greater spending to offset the impact of any potential tariffs, analysts said.

The estimates suggest the scale of China’s fiscal stimulus package would be around 10 to 20 per cent bigger under a victory for Republican nominee Trump compared to Vice-President and Democratic rival Kamala Harris.

And the scheduling of a five-day meeting of China’s top legislative body, the National People’s Congress (NPC) Standing Committee, to overlap closely with the US election reflects the importance of external factors on domestic policies, highlighting the impact of external shocks on the economy and sentiment, said Su Yue, principal economist for China at the Economist Intelligence Unit (EIU).

“The NPC is likely to determine the scale of fiscal stimulus based on the US election outcome. If Trump comes to power, the government may signal more aggressive stimulus to offset market concerns about China,” Su said.

The EIU expects about 6 trillion yuan (US$844 billion) in special sovereign bonds for debt swaps and large bank recapitalisation, and 4 trillion yuan in special local government bonds for the acquisition of idle land and unsold housing inventory, primarily aimed at easing liquidity issues for developers.

“If Trump is elected, the stimulus is likely to exceed this scale, or the NPC will issue a more proactive commitment,” Su added.