The U.S. elections and stimulus details are eagerly anticipated by markets as China prepares for a significant week.

• Beijing will release information on its fiscal stimulus plans on Friday, following its consideration of the U.S. presidential election earlier in the week, as expected by investors.
• According to Ting Lu, the chief China economist at Nomura, the size of China's fiscal stimulus package would be approximately 10-20% larger under a Trump victory compared to the scenario of a Harris win.
• The scale of Beijing's stimulus will be determined not by the election outcome, but the stock market reaction, according to Liqian Ren, head of quantitative investment at WisdomTree.

The outcome of the U.S. presidential election will likely determine the size of China's stimulus plans, analysts said.

The standing committee of the National People's Congress, which is due to end a five-day meeting on Friday, is expected to reveal details on Beijing's fiscal support. Last year, the same gathering saw a rare increase in the fiscal deficit.

The meeting's timing means any details will be out just days after the U.S. has voted for either Donald Trump or Kamala Harris as the next president. Polls close Tuesday local time.

According to Ting Lu, the chief China economist at Nomura, China's fiscal stimulus package under a Trump win would be approximately 10-20% larger than under a Harris win scenario.

Though there will be some impact from the U.S. election result, he warned that most of China's challenges are domestic.

The Biden administration has not yet signaled a major departure from its approach of restricting China's access to advanced technology.

The real estate slump and tepid consumer demand in China's economy may be offset by more tariffs on exports.

According to Zhu Bin, chief economist of Nanhua Futures, increased trade restrictions would necessitate China to focus more on domestic demand to drive growth.

If Trump wins the election, China's domestic stimulus will only be larger, not smaller, according to Zhu. He predicts that Trump has a greater chance of winning, which will increase downward pressure on the Chinese yuan versus the U.S. dollar.

There is disagreement among political analysts on whether China's relationship with the U.S. would improve under Trump or Harris.

From China's perspective, a potential President Harris would make it easier to anticipate the policies that are likely to be implemented, according to Liqian Ren, head of quantitative investment at WisdomTree.

Beijing will not prioritize large-scale support due to U.S.-China competition, and the government's willingness to stimulate will remain lukewarm as long as the goal is to upgrade technology across the board.

The stock market reaction will determine the scale of stimulus, not the outcome of the election.

Ren stated that the market volatility in China, but not in the United States, is likely to make "China feel more obligated to counter this volatility." In contrast to three or four years ago, she said, Chinese stock market volatility today has a greater impact on economic confidence.

In recent weeks, Chinese stocks have moderated their growth following a surge in late September. On September 26, Chinese President Xi Jinping led a high-level meeting to enhance fiscal and monetary policy support and halt the decline in real estate.

Although the People's Bank of China has decreased interest rates, the Ministry of Finance has not yet disclosed information about the expected fiscal stimulus. Finance Minister Lan Fo'an previously suggested an increase in the deficit and stated that any changes would require an approval process before being made public.

How large？

Sources reported that China is considering issuing more than 10 trillion yuan in debt over a few years, according to an analyst's forecast.

According to Zong Liang, chief researcher at Bank of China, Chinese authorities may not reveal a specific number, but if they do, it will likely be more than 4 trillion yuan, which was the amount issued following the 2008 financial crisis. He predicts that the deficit could potentially surpass 4%.

This year, the Chinese government set a deficit target of 3%, up from the previous target of 3.8%.

Ren from WisdomTree stated that her analysis of official statements, media reports, and investment notes showed that stimulus expectations are roughly the same, regardless of whether it is 10 trillion yuan over three to five years or 2 trillion yuan in one year. On average, the annual support is approximately 2 trillion yuan.

Consumption still in question

"Ren stated that people are focusing heavily on the topline number, but they are overlooking how the local government is taking actions that are actually countering stimulus."

Although the central government has provided some support, she believes it will take a long time for local authorities to feel financially secure enough to invest in business activity due to the strict enforcement of tax collection in certain areas.

Numerous Chinese companies have been ordered to repay taxes related to their operations dating back to 1994, as local governments have shifted their focus from land sales to real estate developers for revenue generation.

The finance ministry has highlighted its commitment to resolving local government debt issues. However, analysts have noted that any additional stimulus is likely to benefit banks rather than providing direct financial assistance to consumers.

Although property support may currently be the primary driver of consumption stimulus, Citi analysts suggest that more decisive consumption support could still be a viable option in the face of more unfavorable tariff scenarios.