These developments came as a response to the slowdown in China, and on top of an already generous, targeted and quite innovative monetary stimulus, composed of both cuts in rates, and non-traditional measures to increase lending to small and microbusinesses by 30% in 2019.

As a result, we expect economic growth in China to accelerate timidly from +6.2% y/y in the first quarter to +6.4% y/y in the second half of the year, as the effects of the private sector-oriented fiscal stimulus could take time to materialize. On the other hand, capital markets are expected to react very positively to the double stimulus, not minding the risks accruing on the horizon.

This stimulus package is unlike previous ones, and transmission channels within China and to the rest of the world will be different. Consumer goods and services exporters from industrialized countries into China could be the main winners, especially as US-China trade tensions de-escalate. On the opposite, industrial commodity exporters and countries with large financing needs in the emerging world may not benefit as much. In any case, as growth in the US and Europe is decelerating, China’s decisive move is more than welcome.