China_ 2025 Equity Outlook_ Policy showtime

Economic Outlook - China's GDP growth is projected to decelerate to 4.5% in 2025 from 4.9% in 2024, influenced by property deleveraging and slower exports due to rising trade frictions with developed markets[2][9] - Nominal growth will be constrained by low inflation, with CPI at 0.8% and PPI at 0% for 2025, reflecting demand headwinds and stable global commodity prices[9][10] Market Performance - MSCI China and CSI300 are expected to appreciate by 15% and 13% respectively in 2025, driven by EPS growth forecasts of 7%-10%[2][4] - Housing sales are anticipated to decline by 9% in value and 4% in volume, extending a correction of 57% since 2021[9][10] Policy and Investment - A significant policy shift is underway, with augmented fiscal deficits projected to rise from 11.2% in 2024 to 13% in 2025 to support property destocking and consumption stimulus[2][21] - The government is expected to provide around RMB 8 trillion (approximately USD 1.1 trillion) in additional fiscal support, equating to 5.8% of 2025 GDP[21][26] Sector Insights - Consumption growth is forecasted to rebound to 5.0% in 2025, supported by targeted fiscal spending and improvements in service-oriented sectors[9][10] - The healthcare and broker sectors have been upgraded to Overweight, reflecting a broad consumption tilt in investment portfolios[2][4] Earnings Projections - Profit growth for MSCI China and CSI300 is forecasted at 7% and 10% respectively, below consensus estimates due to tariff risks impacting revenue and profitability[36][42] - Revenue growth is expected to align with nominal GDP growth, projected at 6% for 2025[36][42]