BEIJING (BLOOMBERG) - One morning in early April, Ms Li Fanfan, an elementary school teacher in the central Chinese city of Zhengzhou, set an alarm so that she could grab one of the one million consumption-voucher packages the local government was distributing online.
In about two and a half minutes, 50 million yuan (S$10 million) worth of e-coupons were snapped up, according to local media. Ms Li was among the lucky ones, receiving a package of five vouchers with three different values totalling 50 yuan. She went to a shopping mall and spent about 400 yuan on top of the coupons for two meals, two shirts and some accessories.
At least 50 cities across China have distributed vouchers amounting to more than 6 billion yuan via e-payment systems, according to data compiled by Bloomberg, as local governments struggle to get consumers spending again in the aftermath of the coronavirus. The requirements usually include a minimum spend and are often targeted at restaurants, supermarkets and other outlets hit hard by the outbreak.
The confidence or otherwise of China's army of consumers is key for the nation's chances of economic recovery this year, given the slump in global output and the ongoing contraction in export demand. But with many citizens still wary of even going outside and joblessness on the rise, it's clear that even if online voucher programs can help stabilise consumer spending, they're not a short-cut to a rebound.
"With households' real disposable income declining in the face of Covid-19, vouchers can subsidise some spending on necessities, and help bolster a recovery in retail sales," said Wei Li, senior China economist at Standard Chartered Bank in Shanghai. "It is better to have vouchers than not."
Compared with cash, vouchers have a multiplier effect in boosting consumption due to requirements of minimum spending, and cannot easily be saved.
In some places, an immediate effect is visible. In Zhengzhou, a total of 14.3 million yuan in vouchers has been used, leading to consumer spending of 187 million yuan as of April 7. In Hangzhou, the capital of coastal Zhejiang province, coupons led to more than 1.8 billion yuan in consumption, 12 times the government's subsidy. In the outbreak epicentre of Wuhan, that ratio was 13 times on the first day of coupon usage, according to Tencent Holdings Ltd, which helped in online distribution.
But that doesn't mean an even boost across the economy. Restrictions on movement remain and activity is still depressed. In Jinan, the capital of eastern Shandong province, the local government earmarked the vouchers for tourism and cultural spending. Only about 13 per cent of the 14.3-million-yuan vouchers were used as of April 21, and the multiplier was only 2.8 times.
A closer look reveals that spending has mostly gone to food and other necessities. For instance at CR Vanguard, a retail chain controlled by state-owned China Resources Group, the categories that sell the best with the help of the vouchers are fresh food, sanitisers, snacks and dairy products, according to data provided by the company.
Zhong Xin, a 29-year-old accountant in Wuhan, is only interested in getting vouchers for supermarkets to get daily necessities, though the local government also designed coupons for catering, shopping malls, sport and tourism.
"I don't think I'll dine out or wander around shopping malls even if I get the vouchers," said Zhong, "I'm still very concerned about going out. I think I still need some time to recover mentally from what happened."
Online shopping is still doing better despite the government's effort to help brick-and-mortar stores. A survey done by Chinese consumer finance firm LexinFintech showed 66 per cent of respondents saying that they prefer to shop online with the vouchers, while 53 per cent would spend them on food delivery.
"Given that the face value of the vouchers is not large, it makes sense that consumers are using them on smaller expense items like food," said Ms Julia Wang, senior economist at HSBC Bank Plc in Hong Kong. "Some tourist sites and malls have visitor limits, which may be an additional factor at play."
To lift consumer spending in a more broad-based way, the job market needs to recover swiftly and income growth needs to rebound, Ms Wang said. Otherwise, there will not be a "meaningful increase" in the overall propensity to consume, she added.
Standard Chartered's Li also pointed out that the economic outlook and continued virus containment are more vital in shaping consumer demand.
In Shenzhen, Ms Shirley Zhang, a 31-year-old human resources manager, was keen to get as many vouchers as she can to save money on groceries. She has dined out with friends for the first time in almost three months, spurred by more-than-100-yuan catering vouchers. But she remains cautious about spending on luxury items.
"I read news everyday about companies shutting down and people losing their jobs," said Ms Zhang. "I just made a plan to cut spending on any unnecessary stuff."
