China_ What do local clients think about the economy_ Local marketing takeaways November 2024

Summary of Key Points from the Conference Call Industry Overview - The conference call focused on the Chinese economy and the perspectives of local clients regarding economic conditions and policies as of November 2024 [2][3]. Core Insights and Arguments 1. Concerns on US Tariffs - Onshore clients are highly focused on potential US tariff increases, estimating hikes of 30-40 percentage points on Chinese goods, compared to Goldman Sachs' assumption of an average 20 percentage points [3]. - Clients are interested in the implementation process of these tariffs and China's potential responses, including trade policy retaliation and domestic macro policy stimulus [3]. 2. China's Domestic Policy Offset - There is a consensus among onshore clients that late September marked a turning point for China's policy easing, which is seen as reactive rather than preemptive [4]. - Clients expect that additional measures, such as central government special bond quotas, will materialize in the coming quarters to support economic growth [4]. 3. Prolonged PPI Deflation - Onshore clients have lower expectations for PPI inflation, with many believing it will remain negative in 2025 due to overcapacity in industrial sectors and a prolonged property downturn [8]. - A stronger USD under a potential second Trump administration could further pressure global commodity prices and PPI [8]. 4. Growth Target for 2025 - Despite concerns regarding US tariffs and domestic deflation, most onshore clients view a growth target of "around 5%" for 2025 as likely [9]. - Clients believe that policymakers will avoid setting a significantly lower target to rebuild confidence, although achieving this target may require statistical smoothing [9]. 5. Local Government Debt Resolution - Onshore clients appreciate the ongoing local government debt resolution efforts, viewing them as beneficial for restoring local government functionality and improving government spending [10][12]. - This contrasts with offshore clients who see it merely as a debt swap with limited growth impact [10]. Additional Important Insights - Onshore clients are more patient regarding policy easing and place greater emphasis on forward guidance from top leadership rather than specific stimulus numbers [9]. - There is a general expectation that the total amount of government bond issuance will increase significantly next year, with potential cuts to RRR and policy rates anticipated [7]. - Clients are cautious about the efficiency of policy implementation in areas such as property and traditional infrastructure [7]. This summary encapsulates the key points discussed during the conference call, highlighting the concerns and expectations of local clients regarding the Chinese economy and its policies.