Investing.com — Wells Fargo analysts have expressed doubts about the recent high-profile policy announcements from China, suggesting that the measures taken are unlikely to have a significant impact on the country’s economic trajectory.
The bank argues that the growth effects of these stimulus initiatives will be similar to past experiences and will not address the underlying issues.
In recent weeks, China’s central bank has eased monetary policy, and the Ministry of Finance has deployed fiscal resources primarily aimed at the struggling property sector and local banks.
However, Wells Fargo believes that “with few fiscal resources deployed to support broader domestic demand, we do not believe the growth impact of the latest stimulus announcements will be any different for China.”
The analysts argue that the playbook used over the last fifteen years is insufficient to change China’s short- or long-term economic outlook.
They forecast annual GDP growth to remain around 4.5% in the coming years, emphasizing that policies focused solely on stabilizing the property market and banking sector will not promote substantial consumer spending.
“Any policy adjustments that do not include specific stimulus to boost domestic consumption in our view miss the mark and will ultimately not align with authorities’ intentions,” wrote Wells Fargo.
As the market reacts optimistically to these announcements, Wells Fargo warns that the enthusiasm may be short-lived.
They caution that without strong measures to boost consumer confidence and spending, China could face ongoing economic challenges.
The analysts conclude that unless China shifts its focus to stimulating domestic demand, the current policy responses will only act as temporary fixes rather than effective long-term solutions.