Investing.com -- Wells Fargo now forecasts that China's economy will grow 4.6% in 2024, a downgrade from the earlier estimate of 4.8% and below the government's official 5% target.

The bank’s economists believe that despite recent policy support from Chinese authorities, these measures are not sufficient to address the deeper structural challenges faced by the economy. They highlight that China’s growth remains hampered by a subdued property market, weak domestic consumption, and deflationary pressures, with consumer confidence remaining low.

Chinese policymakers have introduced several measures aimed at shoring up the property sector and stimulating growth, including lowering lending rates and reducing the reserve requirement ratio for major banks. Yet, according to Wells Fargo, these policies are unlikely to significantly change the economic trajectory.

“Directionally speaking, easier monetary policy and support for the property sector is an appropriate course of action; however, we believe the recent announcements are not a cure for China's growth challenges,” economists said in a note.

“As far as property sector support, we believe Chinese consumers are unwilling to direct capital toward real estate at the current juncture, given the sharp and ongoing downturn in the industry,” they added.

Further complicating the economic outlook is China’s monetary policy. Wells Fargo points out that the People’s Bank of China (PBOC) has been in easing mode for some time, but these actions have not been able to ignite economic activity.

Specifically, real interest rates in China remain positive and restrictive. Economists said the "gradual easing of monetary policy that maintains restrictive monetary policy settings will continue to act as a drag on China's economy for the time being.”

In terms of fiscal policy, Wells Fargo notes the limited role it has played in recent years. While China deployed substantial fiscal stimulus in past crises, such as during the Global Financial Crisis, fiscal support has been relatively absent in the post-COVID era.

The report suggests that Chinese authorities may be hesitant to increase fiscal stimulus due to the country's high debt burden and concerns that households would opt to save rather than spend any stimulus, particularly in the current deflationary environment.

Looking ahead, Wells Fargo expects China’s economic growth to slow further in 2025, forecasting a modest 4.3% growth rate.

By Ankur Banerjee and Laura Matthews

SINGAPORE/NEW YORK (Reuters) - As the market euphoria to China's biggest stimulus since the pandemic settles, foreign investors are now asking whether the $114 billion toolkit will provide the spark needed to turn around a beat-up stock market.

Chinese equities have lagged major markets all year, despite a series of piecemeal measures authorities have rolled out to revive the anemic economy and lift stock prices.

This week's measures were sweeping. The package of rate cuts and, importantly for markets, an 800 billion yuan ($114 billion) facility to fund stock purchases showed Beijing's new urgency to cure the world's second-biggest economy of deflation and a distressed property market.

Chinese stocks soared, with the blue chip index CSI300 wiping out its losses for the year and set for strongest weekly performance since 2022. The yuan rose to a 16-month high against the U.S. dollar.

On Thursday, China's leaders pledged to support the struggling economy through "forceful" interest rate cuts and adjustments to fiscal and monetary policies, adding more fuel to the rally.

Investors said that reaction showed how depressed sentiment was but the measures didn't fix what most overseas investors want to see fixed: fiscal measures that directly spur consumer demand.

The package was mostly about "getting liquidity into the markets, but we're at a point in which more liquidity alone isn't going to deliver the sustained recovery long-term investors want to see," said Phillip Wool, head of portfolio management at Rayliant Global Advisors.

"As long as demand remains as weak as it has been, nobody's going to want to borrow, and measures like these won't have the desired impact," Wool said.

Chinese stocks have stuttered in recent years even as markets elsewhere scaled record peaks, leading investors to pull out and stay away, with over a quarter of global funds tracked by Copley Fund Research not holding any exposure to China at all. Almost all funds kept China exposure in 2021.

While the CSI300 index and Hong Kong's Hang Seng have surged in the past two days, they remain down 40% from February 2021 peaks. In comparison, Japan's Nikkei is up 24% and the S&P 500 has risen 45% in the same period.

For Gary Tan, portfolio manager at Allspring Global Investments, this week's measures are unlikely to lead him to shift his underweight position on China.

"We think it will take a fundamental change in China’s deflation outlook and the China property market for investors to commit new funds into China," Tan said.

Vivian Lin Thurston, portfolio manager for William Blair’s emerging markets growth strategy, is currently underweight China and mostly unswayed by the new measures.

However, Thurston said her fund could potentially add to certain stocks that show improved fundamentals and are less impacted by the economic backdrop.

CHEAP STOCKS

The success of some of these measures, including ones aimed at capital markets, will depend on whether institutional investors feel comfortable to come back into equities.

China risks missing this year's economic growth target of roughly 5% due to property downturn and frail consumption, which analysts say can only be fixed by fiscal policies that put money into consumers' pockets.

"Meaningful and effective fiscal stimulus needs to come through in order to address these key economy challenges effectively," said William Blair's Thurston.

To be sure, some investors, such as Jonathan Pines, head of Asia ex-Japan at Federated Hermes (NYSE:FHI), and Rayliant's Wool are attracted by the valuations.

The Shanghai benchmark index trades at price-to-earnings ratio, a commonly used valuation metric, of 12, while the Nikkei trades at 21 and the S&P 500 at 27.

In particular, Bob Zhang, managing partner of Beijing-based Pine Street Capital, likes stocks that focus on AI computing power, semiconductors and software as a service, which he sees as cheap and benefit from global technology developments.

Investors also point to the fact that China is pulling out the stops at the same time that the U.S. Federal Reserve has started cutting rates.

"If the United States continues to cut interest rates as expected, and China continues its policy easing, I believe the market will form positive feedback and continue to rise," said Pine Street Capital's Zhang.

($1 = 7.0165 Chinese yuan)

By Khanh Vu and Francesco Guarascio

HANOI (Reuters) -Elon Musk's SpaceX plans to invest $15 billion in Vietnam in the near future, the government of the Communist-run nation said on Thursday, which could help resolve a stalemate over the launch of its Starlink satellite services there.

Months of talks on the offer of Starlink's satellite internet connection and other communications services were put on hold at the end of 2023, sources familiar with the matter had told Reuters earlier this year, although they resumed later.

"The Vietnamese government is considering the (investment) proposal of SpaceX," a report on the government portal on Thursday quoted President To Lam as saying, asking the company to work closely on completing preparations for the investment.

The remark followed the leader's meeting in New York with SpaceX government affairs official Tim Hughes, who said the company planned to invest $15 billion in Vietnam, a promising market for its satellite internet service, the report added.

The government did not clarify where SpaceX's investment would be made, nor when details could be agreed.

U.S.-based SpaceX did not immediately respond to a Reuters request for comment.

Vietnam's foreign ministry did not respond to a request for comment.

With 100 million people, Vietnam is a large user base for U.S. internet companies such as Meta's Facebook (NASDAQ:META) and Alphabet (NASDAQ:GOOGL), but its ageing equipment can disrupt operations of key optic fibre undersea cables.

Large mountainous swathes also make internet services less reliable in Vietnam, which could also use satellite internet for tasks such as tighter patrolling in the disputed South China Sea where it is often at odds with China.

By Khanh Vu and Francesco Guarascio

HANOI (Reuters) -Elon Musk's SpaceX plans to invest $15 billion in Vietnam in the near future, the government of the Communist-run nation said on Thursday, which could help resolve a stalemate over the launch of its Starlink satellite services there.

Months of talks on the offer of Starlink's satellite internet connection and other communications services were put on hold at the end of 2023, sources familiar with the matter had told Reuters earlier this year, although they resumed later.

"The Vietnamese government is considering the (investment) proposal of SpaceX," a report on the government portal on Thursday quoted President To Lam as saying, asking the company to work closely on completing preparations for the investment.

The remark followed the leader's meeting in New York with SpaceX government affairs official Tim Hughes, who said the company planned to invest $15 billion in Vietnam, a promising market for its satellite internet service, the report added.

The government did not clarify where SpaceX's investment would be made, nor when details could be agreed.

U.S.-based SpaceX did not immediately respond to a Reuters request for comment.

Vietnam's foreign ministry did not respond to a request for comment.

With 100 million people, Vietnam is a large user base for U.S. internet companies such as Meta's Facebook (NASDAQ:META) and Alphabet (NASDAQ:GOOGL), but its ageing equipment can disrupt operations of key optic fibre undersea cables.

Large mountainous swathes also make internet services less reliable in Vietnam, which could also use satellite internet for tasks such as tighter patrolling in the disputed South China Sea where it is often at odds with China.

Such a step may not go down well with Beijing, however.

INVESTING WHERE?

Thursday's news follows a report this month on the government portal that cited Hughes as saying SpaceX aimed to provide Starlink services to the Southeast Asian nation, after the two sides had resumed talks.

At the time, Hughes, the company's senior vice president for global business and government affairs, said SpaceX's deployment of internet services in Vietnam aimed mainly to benefit education and disaster prevention efforts, state media reported.

Last year's talks were stymied by questions about ownership of the company SpaceX would have to set up in Vietnam, which limits foreigners' holdings in such firms to half, while SpaceX wanted at least a controlling stake, sources had told Reuters.

It is unclear whether this issue is still a hurdle.

Vietnam also requires data to be stored domestically, with strict controls on what is visible online.

Industry sources told Reuters SpaceX has suppliers in Vietnam, a major industrial hub home to large manufacturing operations of U.S. firms and their contractors.

Apple (NASDAQ:AAPL), with dozens of suppliers in the country, said in April it wanted to invest more by increasing spending on them.

By Kevin Buckland

TOKYO (Reuters) - The dollar held firm on Thursday following its sharpest rally since early June as traders looked ahead to speeches from key Federal Reserve policy makers later in the day for clues on the pace of interest rate cuts.

The U.S. currency rebounded strongly overnight from a more than one-year low to the euro and 2 1/2-year trough versus sterling.

While there was no obvious catalyst for the rebound, investors appeared to take a more nuanced view on just how aggressive future U.S. rate reductions would be, with Fed speakers this week not presenting a unified view on the path forward.

On Wednesday, Fed Governor Adriana Kugler said she "strongly supported" the decision to cut rates by half a point earlier this month to kick off the easing cycle, but didn't talk about her preferences for the pace of reductions from here.

Earlier this week, Chicago Fed President Austan Goolsbee said policymakers "can't be behind the curve" if the economy is to have a soft landing. Atlanta Fed President Raphael Bostic said the central bank needn't go on a "mad dash" to lower rates.

"I'm not getting the feeling at this point that it's particularly unanimous," said Kenneth Crompton, chief rates strategist at National Australia Bank (OTC:NABZY).

"It sort of feels like they've done their catch up...and from here it's probably more 25s than 50s."

Later Thursday, Fed Chair Jerome Powell gives pre-recorded remarks at a conference in New York, where New York Fed President John Williams also speaks. Boston Fed President Susan Collins and Fed Governors Michelle Bowman and Lisa Cook take to the podium at various other venues as well.

By Nandita Bose and Gabriella Borter

PITTSBURGH, Pa. (Reuters) -U.S. Vice President Kamala Harris said on Wednesday she would offer tax credits to domestic manufacturers and invest in sectors that will "define the next century", as she detailed her economic plan to boost the U.S. middle class.

Speaking at the Economic Club of Pittsburgh in the battleground state of Pennsylvania, the Democratic candidate in the Nov. 5 presidential election said she would give tax credits to U.S. manufacturers for retooling or rebuilding existing factories and expanding "good union jobs," and double the number of registered apprenticeships during her first term.

Harris also promised new investments in industries like bio-manufacturing, aerospace, artificial intelligence and clean energy.

Harris' speech, which lasted just under 40 minutes, did not detail how these policies would work. She highlighted her upbringing by a single mother, in contrast with Trump, the wealthy son of a New York real estate developer.

"I have pledged that building a strong middle class will be the defining goal of my presidency," Harris said, adding that she sees the election as a moment of choice between two "fundamentally different" visions of the U.S. economy held by her and her Republican opponent Donald Trump.

The vice president and Trump are focusing their campaign messaging on the economy, which Reuters/Ipsos polling shows is voters' top concern, as the election approaches.

The divide between rich and poor has grown in recent decades. The share of American households in the middle class, defined as those with two-thirds to double that of median household income, has dropped from around 62% in 1970 to 51% in 2023, Pew Research shows. These households' income has also not grown as fast as those in the top tier.

Trump, Harris said, is "only interested in making life better for himself and people like himself, the wealthiest of Americans."

She said she was committed to working with the private sector and entrepreneurs to help grow the middle class. She told the audience that she is "a capitalist" who believes in "free and fair markets," and described her policies as pragmatic rather than rooted in ideology.

Harris in recent months has blunted Trump's advantage on the economy, with a Reuters/Ipsos poll published on Tuesday showing the Republican candidate with a marginal advantage of 2 percentage points on "the economy, unemployment and jobs," down from an 11-point lead in late July.

Trump discussed his economic plan in North Carolina on Wednesday and said Harris' role as vice president gave her the chance now to improve the economic record of the Biden administration.

"Families are suffering now. So if she has a plan, she should stop grandstanding and do it," he said.While Trump has proposed across-the-board tariffs on foreign-made goods - a proposal backed by a slim majority of voters - Harris is focusing on providing incentives for businesses to keep their operations in the U.S.

Boosting American manufacturing in industries such as semiconductors and bringing back jobs that have moved overseas in recent decades have also been major goals for Biden. The Infrastructure Investment and Jobs Act, the CHIPS and Science Act, and the Inflation Reduction Act - all passed in 2021 and 2022 - fund a range of subsidies and tax incentives that encourage companies to place projects in disadvantaged regions.

PARIS (Reuters) - It is not realistic for France to lower its deficit to 3% of GDP within three years but it could be possible within five years with the right course of action, Bank of France head Francois Villeroy de Galhau on Wednesday.

"Three years is not realistic, not economically or with regards to growth. But to do it in five years is possible," Villeroy, who is also a policymaker at the European Central Bank, told France 2 TV.

Earlier this week, French finance minister Antoine Armand said the country's budget deficit was one of its worst in history. The government currently expects a 2024 budget deficit of 5.1% of GDP - above the European Union's limit of 3%.

Prime Minister Michel Barnier has suggested he would be open to raising taxes on the wealthy and some corporations as the country struggles to contain the deficit. Spending cuts are also expected, which Villeroy said in the interview that he supported.

One of the first hurdles for France's new government will be steering a budget for 2025 through an unruly hung parliament.

BANGKOK (Reuters) - Thailand's government on Wednesday launched the first phase of its flagship $14 billion stimulus handout scheme, which will eventually see an estimated 45 million people receive 10,000 baht each, saying it would spark economic activity.

The initial phase will see 10,000 baht distributed in cash to 14.5 million welfare card holders and disabled people, and is expected to be complete by the end of the month.

"Cash will be put into the hands of Thais and create a tornado of spending," Prime Minister Paetongtarn Shinawatra said at an event to mark the programme's start.

The "digital wallet" scheme was initially structured to distribute the funds through a smartphone app, with the money to be spent in local communities within six months.

"There will be more stimulus measures and we will move forward with the digital wallet policy," said Paetongtarn.

The scheme has been criticised by economists, including two former central bank governors, as fiscally irresponsible. The government rejects that, but has struggled to find sources of funding.

Southeast Asia's second-largest economy is expected to grow 2.6% this year after an expansion of 1.9%, behind regional peers.

($1 = 32.61 baht)

SEOUL (Reuters) - South Korea's Finance Minister Choi Sang-mok said on Wednesday that the government's policy priority was more focused on tackling slowing domestic demand than rising household debt in the short term.

"As the deputy prime minister for economic affairs, I think the recovery of domestic demand is a little more important in the short term," said Choi, as he answered a question about policy priorities at a discussion forum.

The minister said that he expected the Bank of Korea to make a wise decision after a recent interest rate cut by the U.S. Federal Reserve.

The U.S. central bank last week kicked off an anticipated series of interest rate cuts with a larger-than-usual half-percentage-point reduction that Federal Reserve Chair Jerome Powell said was meant to show policymakers' commitment to sustaining a low unemployment rate now that inflation has eased.

The Bank of Korea last month held interest rates steady at 3.50%, the highest since late 2008, as its board members were concerned about rising house prices and household debt, despite easing inflation and slowing domestic demand.

In August, South Korea's house prices picked up pace, with prices in the capital Seoul rising at the fastest rate in more than 4-1/2 years, even after a government policy package to boost supply in the real estate market.

Choi said the government would continue efforts to calm the housing market with sufficient supply and announce soon new measures to stabilise input costs for construction firms.

South Korea's economic growth is expected to be at a level around mid-2% in 2024 and higher than its growth potential, Choi said.

Choi said robust exports would likely lead economic growth, while the recovery of domestic demand was comparably sluggish.

By Stella Qiu

SYDNEY (Reuters) - Australian consumer price inflation slowed to a three-year low in August thanks to government rebates on electricity and a drop in petrol, while core inflation hit its lowest level since early 2022 in a sign costs were cooling.

Market reaction was restrained as the central bank had already said it would look through the decline in headline inflation, which is not enough to justify rate cuts in the near-term.

The Australian dollar came off its 1-1/2-year high and was last flat at $0.6890, while three-year bond futures were little changed at 96.64.

Swaps imply a 75% chance that the Reserve Bank of Australia can start lowering rates in December after it held policy steady and did not discuss the option to hike on Tuesday.

Data from the Australian Bureau of Statistics on Wednesday showed its monthly consumer price index (CPI) rose at an annual pace of 2.7% in August, down from 3.5% in July and dead in line with market forecasts.

On a monthly basis, the CPI fell 0.2% in August from July.

Electricity prices fell almost 15% in August, while petrol dropped 3.1%. On an annual basis, electricity prices tumbled 17.9%, the biggest annual fall since the early 1980s.

That is thanks to electricity subsidies from the federal and state governments, noted the ABS. Otherwise, they would have risen 0.1% in August.

The RBA has kept rates steady since November, judging that the cash rate of 4.35% - up from a record-low 0.1% during the pandemic - is restrictive enough to bring inflation to its target band of 2-3% while preserving employment gains.

However, underlying inflation - which ran at 3.9% last quarter - has fallen very little over the past year, a reason that policymakers are not confident that inflation is moving towards the target range.

Indeed, a closely watched measure of core inflation, the trimmed mean, slowed to an annual 3.4%, from 3.8%, leaving it above the 2-3% target band and a hurdle to cuts in interest rates.

The monthly report also provided the first update on many services for the quarter, which showed services inflation stood at 4.2% in August from a year ago, only slowing a little from July's 4.4%.

"Trimmed mean also came in lower, but not to the same extent as headline, which suggests a dominant fuel component to the headline rate," said Dwyfor Evans, Head of APAC Macro Strategy at State Street (NYSE:STT) Global Markets.

"The RBA remains wary of inflation trends for now, so monetary policy will look through this one month of abnormal price data."

By Lucia Mutikani

WASHINGTON (Reuters) -U.S. consumer confidence dropped by the most in three years in September amid mounting fears over the labor market, though more households planned to buy a home over the next six months.

The Conference Board survey on Tuesday also showed consumers expected inflation to increase in the coming year, clouding their views of the economy ahead of the Nov. 5 presidential election. The economy could determine the outcome of the vote.

Still, consumers remained interested in traveling and dining out as well as going out to movies. That could help to underpin consumer spending and the economic expansion.

The Federal Reserve last week cut interest rates by 50 basis points to the 4.75%-5.00% range, the first reduction in borrowing costs since 2020, which Fed Chair Jerome Powell said was meant to demonstrate policymakers' commitment to sustaining a low unemployment rate. The jobless rate is currently at 4.2%.

"The plunge in consumer confidence underscores the growing pressure on many households as the labor market weakens," said Ben Ayers, senior economist at Nationwide. "If the Fed follows through with a relatively aggressive easing cycle over the next year, that could shore up consumers' optimism in the state of the economy and keep the economy from a hard landing."

The Conference Board's consumer confidence index dropped to 98.7 this month from an upwardly revised 105.6 in August. The decline was the largest since August 2021. Economists polled by Reuters had forecast the index rising to 104.0 from the previously reported 103.3.

The cut-off date for the survey was Sept. 17, before the U.S. central bank kicked off its easing cycle.

The biggest drop in confidence was among the 35 to 54 years age group. Confidence fell across most income groups, with consumers earning less than $50,000 a year experiencing the biggest decrease. The Conference Board said write-in responses about politics, including the November elections, remained below both 2020 and 2016 levels.

"The deterioration across the index's main components likely reflected consumers' concerns about the labor market and reactions to fewer hours, slower payroll increases, fewer job openings, even if the labor market remains quite healthy, with low unemployment, few layoffs and elevated wages," said Dana Peterson, chief economist at the Conference Board.

Stocks on Wall Street inched higher. The dollar fell against a basket of currencies. U.S. Treasury yields rose.

BUYING PLANS MIXED

The share of consumers who viewed jobs as being "plentiful" dropped to 30.9%, the lowest since March 2021, from 32.7% in August. Some 18.3% of consumers said jobs were "hard to get," up from 16.8% last month.

The survey's so-called labor market differential, derived from data on respondents' views on whether jobs are plentiful or hard to get, fell to 12.6. That was the narrowest since March 2021 and was down from 15.9 in August.

This measure correlates to the unemployment rate in the Labor Department's monthly employment report.

Economists said at first blush the shrinking labor market differential would imply the jobless rate rising to 5%, but noted that monthly moves can be noisy.

"The persistent drop in this measure is a clear sign that the labor market is not nearly as tight as it once was," said Shannon Grein, an economist at Well Fargo. "That said, we're hesitant to put too much weight on this data given broader confidence measures have remained depressed this cycle despite resilient spending habits of households."

The unemployment rate slipped in August after rising for four straight months. It has increased from 3.4% in April 2023.

The rise in the unemployment rate has been driven by an increase in labor supply, mostly from immigration. Layoffs remain at historically low levels.

Consumers' assessments of their financial situation, both now and over the next six months weakened. Plans to buy big-ticket appliances were mixed, with a slight increase in the share of consumers intending to purchase motor vehicles, refrigerators and clothes dryers over the next six months.

But the share of those planning to buy television sets and washing machines declined. A new question about services in this month's survey showed strong intentions to spend on healthcare and utilities over the next six months.

Consumers' 12-month inflation expectations increased to 5.2% from 5.0% in August, though more mentioned lower inflation in their write-in responses.

"If inflation expectations continue to rise and the labor market continues to soften, the Fed is going to have a difficult time appropriately recalibrating monetary policy," said Conrad DeQuadros, a senior economic advisor at Brean Capital.

The Fed raised the policy rate by 525 basis points in 2022 and 2023. It is expected to lower borrowing costs again in November and December.

The share of consumers planning to buy a house over the next six months jumped to 5.7%, the highest level since August 2023, from 4.8% in August. That coincides with a decline in mortgage rates to more than 1-1/2-year lows as well as a moderation in house price inflation. Home price appreciation has cooled as a surge in mortgage rates during the spring pushed buyers to the sidelines, resulting in a rise in housing supply.

A separate report from the Federal Housing Finance Agency on Tuesday showed single-family house prices gained 0.1% on a month-on-month basis after being unchanged in June. They increased 4.5% in the 12 months through July, the smallest rise since June 2023, after advancing 5.3% in June.

"Lower mortgage rates should boost demand, however, preventing a significant softening in prices," said Nancy Vanden Houten, lead U.S. economist at Oxford Economics.