CEWC_ Round 2 Stimulus_ Modest Yet More Balanced

Summary of Key Points from the Conference Call Industry Overview - The conference call primarily discusses the economic outlook for China, focusing on fiscal and monetary policies in response to current economic challenges. Core Insights and Arguments - Round 2 Stimulus Initiation: The call indicates the beginning of a second round of stimulus, with an official fiscal deficit projected at 4% and an augmented fiscal expansion of RMB 2 trillion [8][29]. - Policy Rate and RRR Cuts: For the first time, the call mentions potential cuts to the Reserve Requirement Ratio (RRR) and policy rates when deemed appropriate, signaling a more aggressive monetary easing stance [8][29]. - Fiscal Mix Adjustments: There is a shift towards a more balanced fiscal mix, emphasizing larger consumption subsidies and quasi-fiscal expansions, which are expected to support consumption demand as a key economic driver [8][29]. - Consumption Subsidy Program: The expansion of the consumption subsidy program is anticipated to reach RMB 300 billion, targeting various sectors including mobile phones and fast-moving consumer goods [8][29]. - Monetary Easing Expectations: The expectation of a 40 basis points cut in the policy rate (7D OMO) by the end of 2025 is highlighted, along with RRR cuts of 50-100 basis points [8][29]. - Housing Market Concerns: The call reflects ongoing concerns regarding the housing market, with expectations of a contraction in housing investment by approximately 9% in 2025 [8][29]. - Regulatory Environment: A more accommodative regulatory environment is noted, with calls for inter-ministerial coordination to stabilize private sentiment [8][29]. - Trade and Investment Pragmatism: The discussion includes a "unilateral" opening up of trade and investment, suggesting a pragmatic approach to mitigate potential tariff impacts [8][29]. Additional Important Points - Focus on Consumption: The emphasis on expanding consumption demand is identified as the number one key task for economic recovery [8][29]. - No New Guidance on Housing: The lack of new guidance on housing support indicates a cautious approach from the government regarding property debt restructuring [8][29]. - Economic Growth Forecast: The nominal GDP growth forecast remains below consensus at 3%, reflecting headwinds from the housing sector and tariffs [8][29]. This summary encapsulates the critical insights and data points discussed during the conference call, providing a comprehensive overview of the current economic strategies and expectations in China.