FTAdviser.com

Advertising

Last week, the Chinese government’s State Council unveiled a plan to provide a RMB4trn (£395bn) economic stimulus package in an effort to offset the effects of the global economic slowdown on the economy. The plan is due to be implemented over 2009-10 and is equivalent to roughly 6.7 per cent of nominal 2008 GDP.

HSBC said it would take time for the package to work its way through the system and that, until that happened, the company would remain neutral on Developed Markets Asia and underweight Emerging Markets Asia.

Fredrik Nerbrand, head of strategy at HSBC Private Bank, said the stimulus package was likely to help avoid a major contraction of the Chinese economy over the next 12-24 months.

"However, in rebalancing from export-driven growth in the private sector towards growth driven by public investment expenditure, the Chinese authorities and economy could still face challenges if the multiplier effect does not fully kick into action."

This, in turn, will depend on the actions of Chinese savers, Mr Nerbrand added.

“To reap the full benefit of the stimulus package, the Chinese authorities will arguably need to see the multiplier effect in full operation, which requires the recycling of investment expenditure through savings to consumption and more private investments.”