(Bloomberg) -- Global fund managers say German fiscal stimulus would be a greater boon to risk assets than infrastructure spending in China or aggressive central-bank policies.
Uncertainty from the U.S.-China trade war and perceived monetary-policy impotence are increasingly placing the onus on fiscal policy, according to a recent investor survey conducted by Bank of America Merrill Lynch. Yet market participants are focused more on Germany in this regard than China -- the world's second largest economy, which has previously driven global growth with massive infrastructure investment projects.
Aside from a trade deal -- which 38% of respondents said they don't expect to occur at all -- German fiscal stimulus has the greatest appeal among investors looking at risk assets.
Investors aren't the only ones pushing for Germany to act. During last week's European Central Bank press conference, President Mario Draghi stepped up his call for governments to play a larger role in supporting the economy, saying “it's high time for the fiscal policy to take charge.” Former International Monetary Fund chief Christine Lagarde is likely to keep that message going once she takes over the ECB top job in November.
Still, Chancellor Angela Merkel has rejected calls for spending so far, saying last week that the problem isn't a shortage of money for investment and there are sufficient projects in the pipeline. Finance Minister Olaf Scholz said that Germany would stick to a balanced budget but was ready to act in moments of a crisis.
China, too, has been hesitant about ramping up stimulus, even as data this week signaled its slowdown is deepening.
To contact Bloomberg News staff for this story: Carolynn Look in Beijing at clook4@bloomberg.net;Yuko Takeo in Frankfurt at ytakeo2@bloomberg.net
To contact the editors responsible for this story: Paul Gordon at pgordon6@bloomberg.net, Lucy Meakin, Brian Swint
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