Group 1: Economic Theory and Models - The Ricardian equivalence theory is increasingly evident in China, where rising government deficit rates reduce residents' marginal propensity to consume[1] - The RBC model is utilized to simulate the impact of fiscal spending on household consumption and consumption propensity[1] - Labor supply elasticity is identified as a key factor influencing changes in household consumption propensity, with values of -0.12 and 0.8 showing that higher elasticity leads to lower consumption propensity and fiscal multipliers[1] Group 2: Fiscal Spending and Consumption Relationship - Fiscal spending has a crowding-out effect on household consumption, with an average APC of 41% since the reform and a tax rate (τ) of 19.76%, indicating that a 1% increase in τ results in a 1.53% decrease in consumption[1] - In scenarios where private consumption propensity declines, increased fiscal spending is recommended to stabilize consumption levels[1] - The relationship between fiscal spending (τ) and APC indicates that if APC decreases, fiscal spending must increase to maintain consumption levels[1] Group 3: Implications of Government Debt - Concerns over high government debt can lead to reduced consumption as residents anticipate future tax increases to balance fiscal requirements[1] - The sustainability of fiscal policy is crucial; unsustainable debt levels can lead to reduced consumer spending and economic growth potential[1] - Investment growth can suppress overall consumption levels, highlighting the balance needed between investment and consumption[1] Group 4: Simulation Results - The RBC model simulations show that increased government purchases lead to higher output but also result in decreased household consumption due to increased taxation[1] - Higher labor supply elasticity results in a faster decline in household consumption propensity following fiscal shocks, indicating a smaller fiscal multiplier[1]

Group 1: US Economic Outlook - The US economy is expected to slow down significantly due to uncertainties related to trade policies, with GDP growth forecasted to drop from over 2% to 1.4% by 2025 [2][3] - Inflation expectations have risen, with consumer prices projected to increase by 3.0%, up from a previous estimate of 2.5% [2][3] - The Federal Reserve is anticipated to lower interest rates to a neutral level of around 3%, which is not considered contractionary for the economy [4] Group 2: Eurozone Economic Prospects - The Eurozone's GDP growth forecast for 2025 has been revised down from 2.1% to 0.8%, largely dependent on Germany's ability to relax fiscal controls [5][7] - Germany's €500 billion infrastructure investment plan could potentially be a game-changer, although its benefits may take time to materialize [5][7] - The Eurozone's inflation is expected to remain below the European Central Bank's target, allowing for potential interest rate cuts in the latter half of 2025 [8] Group 3: UK Economic Situation - The UK economy is showing signs of stability and growth, with GDP growth forecasted at around 1% for 2025, down from a previous estimate of 1.5% [9][10] - Recent strong growth and private consumption have shifted the risk outlook positively for the remainder of the year [9] - Inflation remains complex, with short-term fluctuations expected, but a gradual easing in price increases is anticipated due to a loosening labor market [10]

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]

Core Viewpoint - The recent surge in U.S. Treasury yields is primarily attributed to Moody's downgrade of the U.S. credit rating, which has raised concerns about the sustainability of U.S. fiscal policy and debt levels [1][8][9]. Group 1: U.S. Treasury Yield Movements - On May 21, the 30-year U.S. Treasury yield rose to 5.09%, and the 10-year yield increased to 4.59%, marking significant rebounds from previous values [1][7]. - The 30-year yield is at its second-highest level since 2007, indicating a notable shift in market sentiment [1][7]. Group 2: Credit Rating Downgrade - Moody's downgraded the U.S. long-term sovereign credit rating from Aaa to Aa1 on May 16, citing rising federal debt and interest payments as a percentage of GDP compared to similarly rated sovereigns [8][9]. - The downgrade reflects concerns over the U.S. government's ability to manage its fiscal policy effectively, especially in light of ongoing discussions about a significant fiscal expansion bill [2][11]. Group 3: Fiscal Policy and Economic Impact - The proposed "big beautiful bill" is expected to increase federal debt by $3.1 trillion over the next decade, with potential increases to $5.1 trillion if temporary provisions are made permanent [2][12]. - The bill's large tax cuts could lead to a projected fiscal deficit rate of 7% by 2026, raising further concerns about fiscal sustainability [2][12]. Group 4: Historical Context of Rating Changes - Historical analysis shows that credit rating downgrades do not always lead to rising Treasury yields, particularly in periods of economic weakness and monetary easing [2][14]. - In contrast, during periods of high growth and inflation, the safe-haven appeal of Treasuries diminishes, leading to increased yields [3][14]. Group 5: Economic Growth and Debt Dynamics - The U.S. government maintains that GDP growth will outpace debt growth, with current average interest rates on existing debt at approximately 3.3% and nominal GDP growth rates above 5% [5][20]. - The Congressional Budget Office (CBO) and IMF estimate that the fiscal multiplier from the proposed tax cuts could range from $75 billion to $225 billion annually, potentially boosting GDP growth by 0.3% to 0.8% [21][24]. Group 6: Market Reactions and Global Implications - Rising U.S. Treasury yields may increase the opportunity cost for overseas equity markets, leading to a shift in global asset pricing dynamics [26]. - The recent increase in yields has coincided with a decline in the U.S. dollar index, suggesting capital outflows from dollar-denominated assets [26].

Group 1: Policy Impact - The fiscal multiplier for the "trade-in" policy in Q1 2025 increased to 2.4, up from 2.1 in Q4 2024, primarily due to the expansion of subsidies to the electronics sector[2] - Retail sales of consumer goods increased by 4.6% year-on-year in Q1 2025, compared to an average monthly growth rate of 3.9% in Q4 2024[3] - If the fiscal multiplier remains above 2.0, a funding input of 300 billion yuan could boost retail sales growth by over 1.2 percentage points[4] Group 2: Sector-Specific Analysis - The subsidy amount for home appliances in Q1 2025 was 21.1 billion yuan, leading to a consumption increase of 51.5 billion yuan, resulting in a fiscal multiplier of 2.43[15] - The subsidy for automobiles in Q1 2025 was 27.9 billion yuan, generating a consumption increase of 51.7 billion yuan, with a fiscal multiplier of 1.86[20] - The subsidy for communication devices in Q1 2025 was 10.5 billion yuan, resulting in a consumption increase of 41.2 billion yuan, yielding a fiscal multiplier of 3.92[23] Group 3: Future Outlook - The acceleration of applications for the "trade-in" policy since April 2025 indicates sustained demand for consumer goods[4] - The government plans to expand the subsidy scope to include service sectors, with a proposed 500 billion yuan for service consumption and elderly care loans[5] - Risks include potential delays in policy implementation and unexpected changes in the international political and economic landscape[27]

Core Viewpoint - The article discusses the impact of the U.S. tariffs on global trade and China's economic growth, emphasizing the need for China to implement substantial policy measures to achieve its economic growth target of around 5% for the year [1][3]. Economic Growth and Policy Measures - To meet the 5% GDP growth target, China may require an additional 2 trillion yuan in policy measures, considering a fiscal multiplier of 0.5, which corresponds to approximately 1.4 trillion yuan needed for a 1% GDP increase [3]. - The first quarter of 2025 saw China's GDP grow by 5.4%, exceeding market expectations, with exports increasing by 6.9% and industrial output rising by 6.5% [1][4]. Tariff Impact and Manufacturing Challenges - The U.S. tariffs are expected to have a delayed impact, particularly in the second and third quarters, as the effects of previous export surges and new tariffs converge [4]. - The U.S. faces significant challenges in reversing the trend of deindustrialization, primarily due to high labor costs and a lack of complete supply chain infrastructure [2][6]. Consumer Spending and Economic Policy - To stimulate consumer spending, there is a need for systemic adjustments in income distribution and fiscal policies, focusing on increasing residents' income share [7]. - Enhancing social security measures, particularly in rural areas, is seen as a necessary step to improve consumption and economic stability [8]. Currency Stability - The Chinese yuan has shown relative stability against the U.S. dollar, which is crucial for maintaining market confidence and mitigating external trade pressures [9]. Real Estate Market Strategies - The Chinese government is expected to continue focusing on stabilizing the real estate market through various measures, including increasing the supply of high-quality housing, which is vital for economic growth [10].

中金研究 3月，社零总额同比增长5.9%，为2024年以来最高单月增速，主要受以旧换新政策的短期提振。我们的估算显示，年初以来以旧换新进展逐步加快，一 季度4类商品财政补贴规模约为645亿元，其中3月约391亿元。政策效果方面，我们估计3月补贴政策对4类商品消费的当期乘数可能在2.8以上。但历史 经验显示，耐用品补贴政策具有透支效应，长期累计乘数会动态减弱，且对同期的其他消费形成一定挤压。我们认为，在贸易形势不确定性大幅上升 的背景下，更要注重"投资于人"，加大对民生领域（比如生育、养育、住房、养老等社会保障）的支持。 点击小程序查看报告原文 截至4月中旬，商务部已披露的4类消费品以旧换新进度如下： （1）汽车方面，截至4月10日零时，汽车以旧换新补贴申请223.2万份，其中汽车报废更新 补贴申请74.7万份，汽车置换补贴申请148.5万份。（2）家电方面，截至4月10日，消费者累计购买以旧换新家电产品3759万台。（3）数码产品方面，截 至4月6日，消费者申请手机、平板、智能手表（手环）3类数码产品购新补贴6486.6万件。（4）电动自行车方面，截至4月11日，电动自行车以旧换新交 售旧车、换购新车各352 ...

Core Conclusion - The article discusses the discrepancies in market expectations regarding this year's fiscal budget, particularly in terms of the scale of spending and deficit levels, highlighting that actual fiscal strength may be closer to economic growth rather than the initially projected figures [2][4]. Group 1: Fiscal Spending Growth - The projected growth of broad fiscal spending is estimated at 3.6 trillion, with a growth rate of 9.3%. However, this calculation may overestimate actual spending due to technical details, suggesting a more realistic growth of approximately 1.6 trillion, with a growth rate around 4% [2][4][5]. - Historical data indicates that the method of summing the two accounts often leads to an overestimation of broad fiscal spending by 1-2 trillion and an overestimation of growth rates by 3-10% [5][4]. Group 2: Government Debt and Deficit Rate - The new government debt is projected to increase by 2.9 trillion, which could imply a broad deficit rate increase of 2 percentage points. However, the actual increase in the deficit rate is likely to be around 1 percentage point, still reaching a historical high [8][9]. - The calculation of the broad deficit rate should consider this year's GDP rather than last year's, leading to a revised estimate of the deficit rate at approximately 8.7% [8][9]. Group 3: Evaluation of Fiscal Spending Effectiveness - The effectiveness of fiscal spending may depend more on the fiscal multiplier rather than just the capital contribution. The capital contribution for this year appears limited, with a focus on expanding special bonds for investment [14][15]. - The government is expected to adopt measures to enhance the investment multiplier, such as optimizing the management of special bonds and supporting new investment areas [15][18]. - There is a notable shift towards increasing the consumption multiplier, with a higher proportion of new bonds allocated for consumption-related projects compared to previous years [17][18].

Core Viewpoint - The article discusses the potential impact of the U.S. increasing tariffs on China to 20%, particularly focusing on the economic implications and China's response strategies [1][3]. Group 1: Economic Impact of Tariffs - A 20% tariff could reduce China's nominal GDP by approximately 0.69 percentage points, translating to a potential real GDP growth reduction of about 0.49 percentage points, assuming no other variables change [1][5]. - The estimated impact on total export growth could range from -2.61% to -4.70%, depending on the elasticity of export prices [2]. - Key industries such as chemicals, textiles, and machinery, which have a higher export share to the U.S. (10-15%), are expected to face significant challenges due to the tariffs [2][3]. Group 2: China's Response Strategies - China has adopted a principle of rapid response and precise countermeasures against U.S. tariffs, including retaliatory tariffs on U.S. coal and fuel [3][4]. - Measures include anti-monopoly investigations targeting major U.S. tech companies and export controls on critical minerals needed for U.S. military and high-tech manufacturing [3][4]. Group 3: Future Macro Policy Considerations - The Chinese government is currently in a wait-and-see mode regarding macroeconomic policies, with no immediate need for intervention as the economy shows signs of stabilization [5]. - If the tariffs are fully implemented, it is estimated that fiscal measures would need to be between 0.62 trillion to 1.33 trillion yuan to offset the economic impact, with a median estimate of 0.98 trillion yuan being a suitable scale for counteraction [5].