UBS anticipates that the forthcoming stimulus package from China, which is estimated to be worth between RMB 1.5 trillion and 2 trillion, will result in a significant migration of investors from the crypto market to conventional assets.
UBS, a Swiss investment bank, anticipates that the fiscal stimulus program being implemented by Beijing, which is estimated to be between RMB 1.5 trillion and RMB 2 trillion, will result in a significant number of investors withdrawing their capital from cryptocurrencies and moving it to traditional assets.
Wang Tao, the Chief China Economist at UBS, stated in a report that Beijing may be utilizing a more expansive figure, which is equivalent to 1.6% to 8% of China’s GDP, and falls within the range of RMB 2 trillion to RMB 10 trillion.
The Chinese government’s fiscal initiatives appear to be primarily focused on stabilizing the real estate market, which has been experiencing significant challenges for some time.
Wang emphasized that an increase in stimulus is necessary to counteract the decline in real estate and to restore consumer and corporate confidence.
The economy has been experiencing a decline due to a sluggish real estate market, and it is possible that it will continue to spiral without a financial injection.
The Chinese economy may experience a 5% increase in growth over the next two years if it is able to stabilize on the back of these stimulus measures.
UBS anticipates that the initial set of fiscal measures will be implemented immediately following the National Day holiday or shortly thereafter, following the publication of the third-quarter economic data on October 18.
Additional information is anticipated for the upcoming year, potentially in the vicinity of the Central Economic Work Conference in December. RMB 2 trillion to RMB 3 trillion in fiscal expansion is on the agenda for 2025.
China has implemented a comprehensive stimulus package that is estimated to be worth RMB 7.5 trillion ($1.07 trillion), which is approximately 6% of the nation’s GDP.
In an effort to re-establish the economy, it is imperative to implement liquidity infusions, interest rate reductions, and mortgage debt relief.
Beijing is allocating RMB 2.5 trillion to mortgage debt relief in order to reduce the costs of servicing for homeowners, particularly those who are purchasing a second home.
In an effort to revitalize the housing market, the minimal down payment for second-time purchasers was reduced from 25% to 15%.
Additionally, the Reserve Requirement Ratio (RRR) has been reduced by 0.5 percentage points by the People’s Bank of China (PBOC), resulting in an injection of approximately RMB 1 trillion into the economy.
It may be feasible to implement an additional 0.25 to 0.5% reduction, contingent upon market conditions. Additionally, there have been rate reductions of 0.2 to 0.25% for medium-term and seven-day lending facilities.
Special sovereign bonds, which have been allocated RMB 2 trillion, are also a priority in order to promote consumer spending and maintain regional stability. Additionally, support for local governments is prioritized.
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