Speaking this week, Arup Raha, head of APAC economics at Oxford Economics, highlighted that China has sufficient fiscal capacity to stimulate the economy in the short term.

Raha stressed that China’s challenge lies not in its ability to provide fiscal support, but in its willingness. He noted that while some stimulus measures, notably those introduced earlier this month, have been implemented, the general consensus is that these efforts remain insufficient.

Earlier this month, China announced a 6 trillion yuan plan to support the heavily indebted local government sector, which has been significantly affected by the slowdown in the property market. However, analysts noted that these measures fell short of investors’ expectations for broader fiscal stimulus.

Today, Raha is rather optimistic that China will implement a stimulus package equivalent to “between 1 and 2 to 3 percent” of gross domestic product (GDP) “around March”, which would boost short-term growth.

“In our opinion, there is fiscal space. They have the capacity to help the economy, they are waiting for the right moment,” he said.

However, Raha warned that China remains grappling with significant structural challenges, which endanger its long-term growth.

“It is important to remember that the problem structure means that a longer-term trajectory is favorable for smoother growth. Yes, there will be a short-term rebound depending on policy and that is what we expect, but in the long term we remain cautious on China,” he said.

India, by contrast, is emerging as a global favorite, fueled by expectations that it will attract foreign direct investment (FDI) originally aimed at China.

While he did not disagree with descriptions of India as being “a good growth story”, Raha said Oxford Economics disagreed with the “degree” of positive sentiment surrounding the ‘India.

“We’re not going to disagree with any of that, it’s all true, (and) India is unfolding like a good story. (But) we’re going to disagree with that a little bit, given the amount of positivity that comes out of India’s history,” he said.

Raha noted that part of his reservations comes from the fact that India is not the main beneficiary of the “China plus one” strategy – a concept encouraging investors to diversify their operations beyond China to other countries. other countries in the region.

According to Statista, gross FDI flows to India reached US$71 billion in the financial year 2023-24. At the same time, preliminary figures from January to October 2024 show that cumulative FDI flows to China fell by 29.8%, totaling about 693 billion yuan (about $95.6 billion).

Raha highlighted that there are two key factors to consider when investing in India.

“The first is the domestic market, which is probably a good idea: it’s a big domestic market, with a lot of people, and it’s growing,” he said.

However, he stressed that the FDI flows attracted by China at its peak were not only driven by its large domestic market, but also by the country’s ability to manufacture and export goods.

“And if India hopes to get close (in terms of FDI), there are a lot of things in the structure of the economy that don’t really line up,” he said.

He added: “When you look at India, if the marginal dollar is leaving China, that’s not the case – it’s going to India to some extent because of the ‘China plus one’ strategy, but India is probably number four. »

Raha noted that India currently ranks behind countries like Vietnam, which benefit more from the “China plus one” strategy.

As such, he stressed, some caution should be exercised about what FDI India can expect.

“We are positive on India and remain positive, but we are cautious about the extent to which people are too optimistic,” he said.

“It’s a good growth story, but probably not as good as people hope.”