Investor Presentation_ China's Fiscal Package_ Part 1

Summary of Key Points from the Conference Call Industry Overview - Industry: Chinese Fiscal Policy and Economic Reflation - Company: Morgan Stanley Asia Limited Core Insights and Arguments 1. Debt Restructuring Initiatives: The Chinese government is initiating a significant debt restructuring plan, estimating the size of implicit local debt to be around Rmb6 trillion over multiple years, with a focus on local debt resolution and recapitalization of state-owned banks [2][4][10] 2. Government Bond Issuance: There is an expectation of government bond issuance amounting to Rmb1,120 billion, which is part of the strategy to manage local debt and support housing inventory buybacks [2][4] 3. Fiscal Stimulus Measures: A fiscal stimulus of 0.5 percentage points of GDP is anticipated for the current year, alongside a policy rate cut of 30 basis points and a 50 basis point reduction in the reserve requirement ratio [4][10] 4. Housing Market Support: The government has officially endorsed using government bonds to buy back housing inventory, indicating a proactive approach to stabilize the housing market [2][4] 5. Social Benefits Expansion: Additional allowances for students are planned, with a projected increase from Rmb2,000 to Rmb12,000 over the next few years, reflecting a commitment to social welfare [2][4] 6. Reflation and Economic Growth: The report suggests a modest quarter-on-quarter growth improvement, but sustainable reflation remains a challenge, with expectations for acceleration in Q4 2024 to Q1 2025 [10][4] Additional Important Content 1. 5R Growth Strategy: The strategy includes restructuring and rekindling private sector confidence, with measures to support the stock market and improve public sector productivity [5][4] 2. Long-term Economic Outlook: The best-case scenario includes a Rmb10 trillion fiscal package over the next two years, aimed at stimulating consumption and addressing elevated household savings [4][10] 3. Policy Measures for Rebalancing: A Rmb300 billion debt-finance program is proposed to support large-scale equipment upgrades and consumer goods trade-ins, alongside controlling new capacity in key industries [4][10] 4. Market Dynamics: A significant slip in the Social Dynamics Indicator could trigger more forceful policy actions, indicating the government's responsiveness to economic indicators [7][10] This summary encapsulates the critical points discussed in the conference call, highlighting the strategic direction of China's fiscal policy and its implications for the economy and investment landscape.