China needs more fiscal reforms to support economy – Goldman Sachs By Investing.com
Investing.com– Analysts at Goldman Sachs say China’s government needs to make more fiscal reforms to help boost the country’s economy, with markets focusing on a number of approaches from Beijing.
GS analysts noted that although the policy efforts made so far show some progress on Beijing’s end, the markets were now expecting more measures from Beijing.
Chinese stocks marked a stellar rally between February and May as Beijing stepped up its support for the economy, with measures ranging from fiscal stimulus, easier lending conditions and more support for the construction sector.
But the rally in Chinese stocks has largely stalled in May, with the blue-chip index treading water as traders await further support.
More support for the policy was concentrated in particular ahead of the Third Session of the Communist Party Congress – an important meeting of high-ranking officials – to be held in July.
GS analysts said that near-term measures from the government could include more borrowing and funding for state governments and continued risk transfers to local government funding vehicles, while in the long term, major tax changes may be needed, as well as “vigilance. implementation” of a comprehensive property tax.
“Instead of a “big bang” policy move, we expect a continuation, or even an increase, of existing change measures over a multi-year horizon,” GS analysts wrote in a note.
The construction sector has been a major risk to the Chinese economy, with GS analysts predicting that the sector, after a prolonged slump over the past three years, is likely to play a minor role in growth in the coming years.
