Never over-think things. China is entering a recession as its property development sector goes bust and an energy crisis shuts industry. That is going to result in stimulus. Perhaps not like the olden days but stimulus nonetheless. What kind?
Fiscal is constrained. There’s plenty of scope at the federal level. But at the local, there are three big problems preventing it. Land sales have dried and so has revenue. Second, the political regime is very confused with Beijing simultaneously demanding borrowing and deleveraging. The NDRC has much higher green benchmarks to pass projects.
So that will mean more weight on monetary policy. This will be added to by the fact that policymakers will not want to ease up on the major driver of the crisis: the three red lines policy. So any property sector easing will need to come via the price of debt, not its availability.
