Barclays_Global_Macro_Thoughts_Bull_in_China_s_shop

Restricted - ExternalFOCUS30 September 2024Global Macro ThoughtsBull in China’s shopAjay Rajadhyaksha+1 212 412 7669ajay.rajadhyaksha@barclays.comBCI, USMax Kitson +44 (0) 20 3555 2386 max.kitson@barclays.com Barclays, UK Where noted in the source notes, the views expressed within this report are taken from previously published research. For further detail, including important disclosures and analyst certifications, please follow the links on each page and on page 8.This document is intended for institutional investors and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors under U.S. FINRA Rule 2242. Barclays trades the securities covered in this report for its own account and on a discretionary basis on behalf of certain clients. Such trading interests may be contrary to the recommendations offered in this report.Please see analyst certifications and important disclosures beginning on page 9.FICC ResearchGlobal MacroRestricted - ExternalCompleted: 30-Sep-24, 11:04 GMT Released: 30-Sep-24, 11:09 GMTRestricted - ExternalThe world at a glance•Last week’s China rally looks like it still has room to run…•…but it is unclear if the stimulus measures are a game-changer for the economy•Japan’s LDP election result means policy normalization will continue •A 50bp Fed cut, a China stimulus, rising Middle East tensions – but oil is struggling•Making sense of it all 30 September 20242Restricted - ExternalChina’s intent is more significant, for now, than the amount of stimulus announced •Last week saw a two-step push from China, first for asset markets and then for the real economy 1oThe central bank announced policy rate and RRR cuts, liquidity support for stocks, and housing policiesoThe MoF announced CNY2trn of new stimulus, amidst reports of a separate $142bn capital injection into banks•The extra 1% of GDP in stimulus so far announced lowers downside risk, but is not a game-changer 1oPast rounds of (fiscal and quasi-fiscal) stimulus have been magnitudes bigger, cumulatively c.15-20% of GDP oLeading policy advisor Lui Shijin (and others) are calling for CNY10trn, to help consumption and real estate•More important is the statement of intent to support consumers directly, a sharp change in tone from the past 1oThe MoF and large cities are now experimenting with consumption vouchers, even if the numbers are small so far oChina has in the past been skeptical of hand-outs to consumers as a way to revive growth; that appears to have changed•We estimate that a CNY10trn stimulus, if announced in the coming weeks, would add 1% to 2025 GDP growth 1oThe plan to recap the banks, if it comes to pass, is also an important step in repairing Chinese balance sheets oIt is possible that the actual numbers announced end up being far less; a mild stimulus would lift 2025 GDP to just 4.4%•The magnitude of follow-through on new stimulus measures is key to whether this ‘bazooka’ is incremental or s