China has launched a new initiative aimed at boosting domestic consumption as the country faces challenges like weak consumer confidence and deflation. President Xi Jinping’s government is shifting its focus from industry support to encouraging people to spend more.
According to Xinhua, China’s state news agency, the government plans to “vigorously boost consumption” across many sectors. This effort includes increasing incomes, stabilizing the real estate and stock markets, and improving healthcare and pension services. However, specific details about the financial aspect of this plan are scarce.
The news helped lift stock markets on Monday, with Hong Kong’s Hang Seng index rising by 1.1%. The CSI 300 index, which tracks stocks in Shanghai and Shenzhen, showed little change. Investors were hopeful after the announcement of the “Special Action Plan to Boost Consumption,” which came soon after lawmakers reaffirmed the importance of consumer spending during recent meetings in Beijing.
Recovery in domestic spending has been slow since the end of COVID-19 lockdowns over two years ago. Many households are hesitant to spend, leading to deflation in consumer prices earlier this year. The ongoing troubles in China’s real estate sector have raised concerns and prompted economists to call for stronger consumer support.
Recent data from the National Bureau of Statistics indicated that retail sales in January and February increased by 4% compared to the previous year, surpassing the predicted growth of 3.7%.
This consumption plan includes plans to raise the minimum wage, enhance education support, and introduce childcare subsidies. Lynn Song, an economist at ING, noted that this could help transition China toward a consumption-driven growth model, provided it’s executed correctly.
Industrial production also showed positive signs, with a reported 5.9% growth year-on-year in the first two months of 2025, slightly slower than the previous month but ahead of analysts’ forecasts.
Additionally, the government is encouraging “inbound” consumption by promoting tourism. Visa-free travel to many countries has been extended in an effort to revive this sector, which had suffered during the pandemic.
Experts like Xu Chenggang from Stanford University emphasize that while Beijing’s focus on boosting consumption suggests an understanding of the economic challenges at hand, there is still uncertainty about how effectively demand will be stimulated. He pointed out the need for more concrete steps in supporting consumer spending rather than just focusing on supply-side measures.
As the nation navigates these economic challenges, the willingness of its consumers to engage in spending will be crucial for recovery.
For more detailed information on China’s economic policies, you can refer to Reuters.
Check out this related article: Trump Plans Crucial Talk with Putin on Tuesday: Aiming to End the Ukraine Conflict
Source link