Summary of Key Points from the Conference Call Industry Overview - The report focuses on the fiscal performance of China, particularly in September, highlighting improvements in both fiscal revenue and expenditure compared to previous months. Core Insights and Arguments 1. **Fiscal Revenue and Expenditure Growth**: - Fiscal revenue growth increased to **2.6% year-on-year (yoy)** in September from **2.0% yoy** in August, while fiscal expenditure growth rose to **3.1% yoy** from **0.8% yoy** [1][2][6] - The growth in tax revenue was a significant contributor, offsetting a deeper contraction in non-tax revenue [3][6] 2. **Property-Related Revenue**: - Property-related government revenue showed some improvement, with land sales revenue contracting by **0.9% yoy** in September compared to **-5.4% yoy** in August, and property-related tax revenue contracting by **3.4% yoy** from **-11.6% yoy** [2][7] - Overall, government revenue from the property sector declined by **1.6% yoy** in September, an improvement from **-7.0% yoy** in August [7] 3. **Augmented Fiscal Deficit (AFD)**: - The AFD ratio was reported at **-12.6% of GDP** on a 3-month moving average basis, slightly widening from **-12.4%** in August [3][8] - The fiscal "spend-through" ratio increased to **98.8%** in September from **97.3%** in August, indicating an acceleration in fund deployment by the government [8][9] 4. **Future Expectations**: - Despite improvements, structural challenges remain, including a soft labor market and a prolonged property downturn, necessitating targeted easing measures [9] - The majority of growth impulses from recent easing measures are expected to materialize in late 2025 or early 2026 [9] Additional Important Information - The report indicates that the year-to-date government revenue from land sales has fallen by **4.2% yoy**, with a forecast for a **5-10% contraction** for the year due to less favorable base effects in Q4 [7] - The report also notes a significant increase in stamp tax revenue from stock trading, which surged to **342% yoy** in September from **226% yoy** in August, although it only accounted for less than **1%** of total fiscal revenue [6] This summary encapsulates the key points regarding China's fiscal performance and the implications for future economic conditions, highlighting both improvements and ongoing challenges in the fiscal landscape.

Investment Rating - The report does not explicitly provide an investment rating for the industry Core Insights - Fiscal easing has been the primary driver of China's cyclical policy in recent years due to weak private demand and muted monetary policy transmission [3][4] - The estimated short-term fiscal multiplier for China ranges from 0.2 to 1.9, with a mean of 0.7 and a median of 0.6 for a one-year horizon [13][16] - The report estimates China's fiscal multiplier to be around 0.5, indicating that a 1 percentage point widening in the augmented fiscal deficit (AFD) would boost real GDP by 0.5 percentage points after four quarters [6][24] - The AFD is projected to widen to 13.0% of GDP in 2025 and 13.5% in 2026, which is expected to increase real GDP growth by 1.1 percentage points in 2025 and 0.6 percentage points in 2026, compared to a 0.5 percentage point drag in 2024 [6][41] Summary by Sections Fiscal Multiplier Estimates - Recent literature suggests a wide range for China's fiscal multiplier, with discrepancies attributed to different sample periods and estimation techniques [13][14] - The report's analysis indicates a cumulative fiscal multiplier of approximately 0.2-0.3 in the first two quarters after a fiscal shock, rising to around 0.5 in the subsequent quarters [28][39] Augmented Fiscal Deficit (AFD) - The AFD has averaged over 11% of GDP in the past three years, while nominal GDP growth has been below 5% [17] - The report highlights a shift towards increasing the official government debt since the onset of COVID-19, enhancing the proportion of on-budget fiscal deficit in the AFD [17][21] Economic Growth Impact - The report anticipates that fiscal policy will significantly support GDP growth in the coming quarters, with a peak incremental fiscal boost expected in Q4 2025 [41][42] - The estimated growth impact of AFD widening is projected to be 1.1 percentage points in 2025 and 0.6 percentage points in 2026, with a quarterly incremental effect diminishing after the fourth quarter [41][44]