China set for stronger growth Amid policy push, but US tariffs remain wildcard:UBS

Investing.com — China is likely to deliver stronger-than-expected annual growth, underpinned by Beijing’s willingness to roll out much needed policy support including fiscal and other supportive measures, though any potential sharp U.S. tariff hike carries a big threat, according to analysts at UBS.

“In light of the stronger-than-expected Q3 GDP growth reading and recently announced policy push, we now see q/q GDP growth accelerating to 6.5% (SAAR) in Q4,” UBS said in a note on Friday after upgrading its outlook on China economic growth.

UBS now expects China gross domestic product, or GDP, to grow at 4.8% in 2024, up from a prior forecast of 4.6%, citing better-than-expected third-quarter economic data and a slew of new policy measures announced since late September.

China reported Q3 real GDP growth of 4.6% year-on-year, slightly better than the 4.4% consensus estimate, underpinned by improved September performance in fixed asset investment and retail sales.

The more sanguine outlook on China is also supported by Beijing’s willingness to continue roll out policy measures aimed at reducing government arrears, easing constraints on local government spending, and lowering mortgage rates, which UBS estimates could reduce household interest burden by RMB 150B a year.

“[T]he additional fiscal resources will likely create a stronger positive fiscal impulse in Q4 than we had assumed in our earlier forecast,” UBS added.

But beyond China, the outcome of the U.S. election, may offset even a large fiscal bazooka from Beijing, particular if pro-tariff Republican presidential candidate Donald  Trump is victorious. 

In the event of a sharp U.S. tariff hike, China’s growth could fall below 4% “even with bigger policy stimulus,” UBS said.