China is turning its focus to boosting consumption in the government’s latest effort to steer a revival in the economy after its post-Covid recovery at the start of the year fizzled.
(Bloomberg) — China is turning its focus to boosting consumption in the government’s latest effort to steer a revival in the economy after its post-Covid recovery at the start of the year fizzled.
Officials from the National Development and Reform Commission, and other ministries will hold a press briefing at 3pm Monday in Beijing to outline measures to expand consumption. The government announced a raft of steps on Friday focused specifically on the so-called light industry, which covers items from home goods, food and paper-making to plastic products, leather and battery.
Beijing has made several pledges in recent weeks to revive the economy and boost business confidence, buoying financial markets. The Communist Party’s Politburo last week signaled more easing of property measures, support for consumption and resolving the debt problems of local governments.
“While the actual implementation and depth of these policies remain untested, the meeting, combined with the recent series of policy announcements, has created a significant psychological impact,” said Tommy Xie, an economist at Oversea-Chinese Banking Corp. “This shift has redirected investors’ perspectives from seeing the glass as half-empty to viewing it as half-full.”
Consumer spending remains subdued, with latest high frequency indicators showing a drop in car sales in July from the previous month and a slide in home purchases. The latest surveys from China Beige Book, a US-based data provider, show households cut back on spending on everything but travel and restaurants in July.
The measures announced Friday were focused on boosting the size of the light industry sector, and creating an exchange dedicated to helping small firms get access to funds.
However, economists pointed out that the measures are still largely focused on the supply side, and pushing consumers to spend more will be challenging.
“It’s difficult to stimulate the demand side with policies,” said Bruce Pang, head of research and chief economist for Greater China at Jones Lang LaSalle Inc. “When residents are generally unwilling to spend, and the government is unwilling to handout subsidies to increase the consumption tendency, policymakers can only adjust the supply for consumer goods and services to better meet the demand.”
Earlier this month, the NDRC said China would spare no time making and introducing policies to boost consumption and a slew of new measures would be introduced to lift sales of cars, electronic products and rural consumption.
More stories like this are available on bloomberg.com
©2023 Bloomberg L.P.