- On Sunday, China unveiled a "Special Action Plan to Boost Consumption" aimed at supporting domestic spending within the globe's second-largest economy.
- The extensive rollout also detailed additional actions, including implementing "various strategies" to steady the equity markets and crafting more bond offerings tailored for retail investors.
- Currently, China is experiencing a slow consumer market, as evidenced by the sharpest decline in the latest CPI for February in more than a year, along with the PPI remaining in negative territory since September 2022.
China announced a " Special Strategy Initiative to Increase Consumer Spending on Sunday as an attempt to bolster domestic spending in the globe’s second biggest economic market.
The General Office of the Central Committee, an office directly under China's ruling party, said the plan was to vigorously boost consumption, expand domestic demand, and "enhance consumption capacity by increasing income and reducing burdens," according to a Google translation of the report.
The extensive rollout also detailed additional actions, including implementing "various strategies" to steady the equity market and crafting more bond offerings tailored for retail investors.
China's CSI 300 index and Hong Kong's Hang Seng index saw modest increases on Monday, showing gains of approximately 0.1%.
This follows one week after Chinese Premier Li Qiang presented his yearly address on governmental activities, where he highlighted the increase in consumer spending as the primary objective for the coming year.
Back then, Chinese officials have progressively recognized the importance of addressing this issue. to combat domestic deflationary pressures.
Currently, China is experiencing a slow-moving consumer market, as evidenced by the sharpest decline in the latest consumer price index for February in more than twelve months, along with a continuing decrease in the producer price index since October 2022.
The proposal unveiled on Sunday included measures to boost both incoming international and local travel. It aimed at assisting icy and snowy areas to transform themselves into internationally renowned spots for wintertime activities. Additionally, unilateral visa exemptions would be increased, and regional entrance regulations would undergo improvements.
Although the strategy doesn’t appear to include “any major innovations,” presenting it as an actionable plan indicates that specific measures at regional levels will ensue, according to Lynn Song, ING’s lead economist for Greater China, who stated this observation.
She emphasized that the plan demonstrates China's dedication to tackling long-term structural problems like wage stagnation, the adverse impact on household wealth due to the real estate and stock market conditions, and inadequate social welfare systems.
The proposal aims to boost the earnings of people living in both cities and countryside areas, including farmers. This would be achieved through measures like providing job assistance programs and maintaining the current unemployment benefits policies.
Song highlighted that "these issues probably require strategies spanning multiple years instead of solutions that can be implemented within a few months. It’s reassuring that policymakers are approaching these topics with a clear-headed perspective, which ought to facilitate the long-term shift towards an economy more reliant on consumer spending."
I would prefer to go with the saying "Rome wasn't built in a day." What do you make of that?
As the saying goes, Rome wasn’t constructed overnight—and neither was BYD’s rise or China's leadership in electric vehicles. Many significant Chinese policies require considerable time to yield results, and this document lays down foundations for the future growth of the consumer sector,” Song commented.
In March, Shen Danyang, who leads both the drafting team for the Government Work Report and serves as the director of the State Council Research Office, stated that due to potential new disruptions to international trade, China needs to concentrate more on stimulating internal consumption. According to him, this shift was recommended by Chinese policy makers.
At their yearly parliamentary session in January, Chinese officials committed to issuing an extra 300 billion yuan (approximately $41.45 billion) in ultra-long special government bonds aimed at bolstering consumer subsidies.
Richard Harris, who leads Port Shelter Investment Management as CEO, spoke with 's "". Squawk Box Asia that Chinese authorities truly need to concentrate on resolving issues within their domestic economy.
"The authorities are committed to boosting the economy, steadfast in keeping it running, and despite potential problems on the export front, they remain resolute in reviving the domestic market. They have no choice but to do so," Harris stated.
— Anniek Bao contributed to this report.
