Investing.com — Wells Fargo analysts expressed their skepticism about recent policy announcements from China, suggesting in a recent note that the measures taken will not have a significant impact on the country's economic trajectory.
The bank said that the growth of these restructuring programs will be similar to the previous experience, which cannot cope with the problems.
In recent weeks, China's central bank has eased monetary policy, and the Ministry of Finance has deployed financial resources aimed primarily at the struggling real estate sector and local banks.
However, Wells Fargo believes that “since there are fewer financial resources deployed to support broad domestic demand, we do not think the growth impact of recent stimulus announcements will be different in China.”
Analysts argue that the playbook used over the past fifteen years is not enough to change China's economic outlook in the short or long term.
They forecast annual GDP growth to remain around 4.5% in the coming years, highlighting that policies focused solely on stabilizing the real estate market and the banking sector will not stimulate consumer spending.
“Any policy changes that do not include a direct incentive to stimulate domestic consumption in our view misses the mark and will not be consistent with the authorities' goals,” Wells Fargo wrote.
As the market reacts with optimism to these announcements, Wells Fargo cautions that the excitement may be fleeting.
They warned that without strong measures to boost consumer confidence and spending, China could face continued economic challenges.
Analysts conclude that unless China shifts its focus to stimulating domestic demand, current policy responses will serve as short-term fixes rather than effective long-term solutions.
