The bank argued that the growth effects of these stimulus initiatives will mirror past experiences, falling short of addressing the underlying issues.
In recent weeks, China’s central bank eased monetary policy, and the Ministry of Finance has deployed fiscal resources aimed primarily at the struggling property sector and local banks.
However, Wells Fargo believes that “with few fiscal resources deployed toward supporting broader domestic demand, we don’t think the growth impact of the latest stimulus announcements will be any different for China.”
The analysts contend that the playbook used over the last fifteen years is insufficient for changing China’s short- or long-term economic outlook.
They forecast annual GDP growth to remain around 4.5% in the coming years, highlighting that policies focused solely on stabilizing the property market and banking sector will not foster substantial consumer spending.
“Any policy adjustments that do not include specific stimulus to spark domestic consumption in our view miss the mark and will ultimately not match authorities’ intentions,” wrote Wells Fargo.
As the market optimistically reacts to these announcements, Wells Fargo warns that the enthusiasm may be fleeting.
They caution that without robust measures to boost consumer confidence and spending, China could face persistent economic challenges.
The analysts conclude that unless China shifts its focus toward stimulating domestic demand, the current policy responses will merely serve as temporary fixes rather than effective long-term solutions.
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