Coming at a time when China’s post-Covid recovery has lost momentum, with falling exports and suppressed investment figures, the plan includes 20 measures targeting various sectors – from property and cars to dining – and it is in line with Beijing’s recent calls and directives at high-level meetings
Li Chunlin, deputy head of the NDRC, said at a press conference on Monday that offline spending saw a “fast recovery” in the first half of the year, citing a boom in domestic travel and the concert industry.
However, “some residents have weak confidence in spending, and they have many concerns”, he conceded.
In a bid to “stabilise big-budget consumption”, the NDRC decreed that authorities must ensure that first-time homebuyers and those who seek to improve their housing conditions are supported. It also banned local-level governments from issuing further car-purchasing restrictions that had been widely imposed in a bid to cut carbon emissions.
Additionally, it said the services sector will benefit from more rapid approvals of large-scale concerts and sporting events.
The plan’s unveiling also came after the NDRC, at an economic meeting on Sunday, said that expanding household consumption was one of the major tasks for the central government over the remainder of this year.
Officials are hoping to see big-budget expenditures recover steadily, with spending on services growing at a “relatively quick growth rate”, while private investment revives, according to an official readout of the meeting on the commission’s website.
In July, multiple ministries jointly rolled out two separate plans to support purchases of cars, household appliances and furniture.
What the government is offering is subtraction – offering lower prices – but what’s more needed is addition – higher income
Weak consumer confidence has been one of the top challenges for China since the onset of the pandemic. Last year, consumption accounted for 32.8 per cent of China’s gross domestic product (GDP) growth, down from 54.5 per cent in 2021.
Shao Yu, chief economist at Shanghai-listed Orient Securities, said spending will still be a very important part of the economy this year, but these types of government policies may not do much to boost growth.
While they focus on tax cuts and coupons, the key to boosting consumption is people’s job security and pay rise, he noted.
“What the government is offering is subtraction – offering lower prices – but what’s more needed is addition – higher income,” he said.
Despite a robust rebound in some consumer sectors this year, the recovery in spending on long-lasting consumer durables – such as homes and vehicles – has remained sluggish, largely due to consumers’ weak income expectations, he said.
“People will spend on big items only when there’s more certainty about economic growth,” he said.
In the first half of the year, China’s real estate investment dropped by 7.9 per cent from a year earlier, which led to a decrease in big-budget spending on related expenditures, including household appliances and furniture.
Meanwhile, the jobless rate among China’s young adults aged 16-24 climbed to a record 21.3 per cent in June, continuing to raise the record from 20.8 per cent in May, according to official figures.
Standard Chartered also noted an uneven recovery in China’s consumption of different goods and services, in its latest research note.
While spending on cheaper items such as food, clothing and transport saw a robust recovery, bigger expenditures such as rents and utilities fell further below the pre-pandemic 2017-19 trend level, “reflecting the continued slowdown in China’s housing market”, the multinational bank said in a note on Monday.
Overall, China’s household consumption saw a strong rebound in the first six months, contributing 4.2 percentage points to its 5.5 per cent GDP growth, it said.
It is expected to continue to recover in the next half of the year, but “at a slower pace than in the first half as the post-reopening boost dwindles”, it added.
