China’s $1.4-trillion plan aimed at rebooting the economy, by authorising local governments to refinance debt, may appear substantial on paper. However, Friday’s announcement by the National People’s Congress (NPC) will likely fall short of the amount needed to address the problem of indebtedness of the local governments and is nowhere close to a fiscal bazooka that was being speculated on. The plan raises the local debt ceiling to 35.52 trillion yuan, allowing the issuance of six trillion yuan in special bonds over three years to swap hidden debt. Beijing’s monetary and refinancing packages should have packed in a lot more at a time when global growth and trade are expected to slow as a consequence of trade measures expected to be rolled out by the US under Donald Trump’s leadership.

The promise of a big stimulus had prompted foreign portfolio investors (FPI) to move out of India and to China even though growth in that economy continues to be lacklustre — the GDP grew at just 4.6% in the September quarter. In October, FPIs sold close to $11 billion worth of Indian stocks, sending a big chunk to China. To be sure, foreign funds could continue to allocate money to Chinese stocks given they are a lot more reasonably valued than Indian equities. India’s Nifty is currently trading at a one-year forward price-earnings (P/E) multiple of 21.3 times compared with the Shanghai Composite’s 12.9 times. That’s a significant difference. However, following Trump’s electoral victory, the bets are likely to be a lot smaller than anticipated earlier.

Experts now believe that global fund managers will channel their funds into Japan and India, at least until they are able to fully assess the impact of the Trump government’s trade stance on the Chinese economy. Trump has indicated that tariffs on Chinese imports into the US could be hiked as much as 60%. That would not just significantly lower China’s exports, debilitating the economy, it would also offset the net impact of the stimulus measures. At a time when the economy is vulnerable to more weakness, Beijing would not be in a position to depreciate the renminbi to the extent it might want, for fear of large capital outflows. Foreign funds would be spooked if the renminbi was to weaken too much. In this context, Trump too has been seen to be in favour of a weaker dollar so as to retain the US’ competitiveness. Any major changes in the values of global currencies would undoubtedly have an impact on the rupee, which in turn would determine the decisions of fund managers on investments into India’s stocks and bonds.

The expected trade protectionism in the US and many other economies portends a period of uncertainty that cannot be good for companies and businesses across the globe. India’s exporters, already under pressure, must brace for disruption in trade caused both by higher tariffs and the depreciation of competing currencies. It is also possible China will move to make business conditions even more attractive for global corporations so as to thwart a China Plus One strategy. It’s not clear how exports of goods made by multinational corporations to the US would work out if all economies were to become more protective. Given how the Indian economy seems to be losing momentum — maybe temporarily — the government must work to attract more foreign direct investment. Investors in the markets must be convinced that all potential risks to businesses are being addressed.