China released a plan to boost household spending on everything from electric appliances to furniture as economic growth slows, though economists say it’s still light on the kinds of policies that would meaningfully boost the recovery.
(Bloomberg) — China released a plan to boost household spending on everything from electric appliances to furniture as economic growth slows, though economists say it’s still light on the kinds of policies that would meaningfully boost the recovery.
Local authorities are encouraged to help residents refurbish their homes, and people should get better access to credit to buy household products, according to the plan released jointly by 13 government departments.
The measures come a day after China posted weaker-than-expected economic growth for the second quarter as retail sales cooled, the property market downturn deepened and youth unemployment hit a new high. Relatively weak spending on home appliances, furniture and decoration materials this year prompted the plan, Commerce Vice Minister Sheng Qiuping said at a briefing detailing the measures Tuesday.
The 11-point package is aimed at “unleashing the potential of household consumption,” according to the statement issued on the Ministry of Commerce website.
The plan offered few specifics on the potential for direct cash support that many investors have been hoping for. The measures are “very small steps,” said Larry Hu, head of China economics at Macquarie Group Ltd., adding that policies targeting property and infrastructure would likely have a bigger impact on the economy.
At the Tuesday press briefing, officials from the commerce ministry highlighted mostly supply-side measures. The government said it will guide e-commerce platforms and companies that make home-related products to expand into rural areas and provide cheap renovation services.
The government will also develop manufacturing hubs that make such products, officials said.
Chinese policymakers have been cautious this year about rolling out stimulus, having trimmed policy rates just once while mostly relying on targeted measures such as extending tax exemptions on electric car purchases. Last week authorities also extended loan relief to developers, an effort to shore up a property sector in crisis.
The CSI 300 consumer discretionary index of stocks closed 0.4% higher on Tuesday after falling in the previous two sessions, as traders responded positively to the policy announcement.
Home-improvement stocks were among the biggest gainers. Major furniture and home decorations chain Red Star Macalline Group rose 1.4% in Hong Kong, while mainland-listed Zoy Home Furnishing Co. Ltd. gained 4% and Guangdong Dongpeng Holdings, which makes ceramic tiling, jumped 8.2%. Xilinmen Furniture Co. Ltd. increased 4.8%.
Limited Help
Slower furniture sales have been a drag on overall retail sales growth since the property market began to tumble in late 2021. Furniture inventory has also been elevated.
Sheng from the commerce ministry said home-related products have long supply chains and considerable market size — which means that targeting them would help lift overall consumption and thus the economy.
But the government’s plans to spur sales of home appliances — along with other measures, such as the earlier ones for electric cars — fall short of being a “game changer” in the way policies intended to stabilize property demand would, said Macquarie’s Hu. Actions channeling funding into infrastructure via policy banks and special bonds would also benefit the economy, he added.
According to the plan released Tuesday, households will get support to buy new smart home appliances, while regions where conditions are right should provide “appropriate” subsidies or discounted loans for purchases of low-carbon construction materials.
Financial institutions will also be encouraged to boost credit support for purchases of goods for the home, according to the document. Loan rates and maturities should be set at “reasonable” levels, it added.
It’ll be tough for the measures to have an impact on the macro economy given sluggish consumer confidence, said Xing Zhaopeng, senior China strategist at Australia & New Zealand Banking Group Ltd.
“I think policies should focus on confidence,” Xing said. He pointed to measures like a new pilot program in eastern Zhejiang province — which will remove restrictions on household registrations in most areas — as more promising for consumption.
China’s recovery had been driven by consumption earlier this year, but momentum is now waning. Monday’s official economic data prompted several banks including Citigroup Inc. to cut their growth forecasts for China this year, with some even warning that the government’s around 5% target was now at risk.
The National Development and Reform Commission, China’s top economic planning body, had hinted at more measures to support consumption in a briefing with reporters earlier on Tuesday.
“Promoting consumption is currently the key to restoring and expanding demand,” Jin Xiandong, director of the NDRC’s policy research office, said. “People’s ability and expectation on consumption is still rather weak and the infrastructure and environment for consumption need to be improved.”
A slew of “pragmatic and effective” steps will be applied to boost purchases of big-ticket items, cars, electronic products, as well as consumption in rural areas, he said.
(An earlier version corrected a company misspelling in stocks paragraph.)
–With assistance from Catherine Ngai and Martin Ritchie.
(Updates with additional details from press conference.)
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