China's consumers keep their wallets in lockdown as COVID-19 curbs ease - CNA

Chinese authorities, however, have been reluctant to spur consumption with cash handouts similar to those in developed countries.

They face fiscal constraints, and fear that handouts would end up favouring China's wealthiest regions, which were hardest hit by the lockdowns, at a time when the government has pledged to address economic inequality. Authorities also worry that any government cash given to China's typically thrifty consumers would end up in savings accounts rather than getting spent.

Instead, China's cabinet has unveiled a package of policy measures to help COVID-19-hit businesses and spur investment, with only limited steps to encourage purchases of cars and home appliances.

Shenzhen has allotted 500 million yuan (US$75 million) for consumption vouchers and 100 million yuan in subsidies for consumer electronics, which combined are equivalent to roughly US$5 per resident.

Shanghai is offering subsidies of 10,000 yuan for residents who switch to electric cars. Most of its measures to reboot an economy shattered by two months of lockdown have focused on supporting businesses.

Such support for consumers hard-pressed by the pandemic is dwarfed by the US$3,200 in stimulus cheques received by millions of Americans since early 2020.

"The authorities are rolling out policies to stimulate consumption, but it would be hard to see a sharp rebound," said Zhang Yiping, economist at China Merchants Securities in Shenzhen.

"People's incomes are diminished and there's very heavy pressure on employment."

The consumption slump has stoked debate among economists and policy advisers on whether China should take more direct stimulus steps to support consumers.

Lin Yifu, a Peking University professor and former World Bank chief economist, recommends giving 1,000 yuan to families in areas under lockdown. His colleague Yao Yang goes further, suggesting that China give 1,000 yuan to each resident, preferably in digital currency.

But Chinese policymakers show no signs of budging from their preference for supporting businesses and infrastructure projects, policy insiders said.

"We should focus on boosting effective investment. Without investment, consumption will falter soon," Jia Kang, the former head of the finance ministry's think tank who now runs the China Academy of New Supply-side Economics, told Reuters.

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2022-06-07 10:03:00Z
CBMid2h0dHBzOi8vd3d3LmNoYW5uZWxuZXdzYXNpYS5jb20vYnVzaW5lc3MvYW5hbHlzaXMtY2hpbmFzLWNvbnN1bWVycy1rZWVwLXRoZWlyLXdhbGxldHMtbG9ja2Rvd24tY292aWQtY3VyYnMtZWFzZS0yNzMyMTgx0gEA