China unveils package to boost consumption as growth loses steam

SHANGHAI - China has released a plan to boost household spending on everything from electric appliances to furniture as economic growth slowed, though economists say it is still light on the kinds of policies that would meaningfully boost recovery.

Local authorities are encouraged to help residents refurbish their homes, and people should get better access to credit to buy household products, according to the plan released jointly by 13 government departments.

The measures come a day after China posted

weaker-than-expected economic growth for the second quarter

as retail sales cooled, the property market downturn deepened, and youth unemployment hit a new high.

The 11-point package is aimed at “unleashing the potential of household consumption”, according to the statement issued on the Ministry of Commerce website.

Households will get support to buy new smart home appliances, while regions where conditions are right should provide “appropriate” subsidies or discounted loans for purchases of low-carbon construction materials, it said. 

Financial institutions will also be encouraged to boost credit support for purchases of goods for the home, the document said. Loan rates and maturities should be set at “reasonable” levels, it added.

The plan offered few specifics on the potential for direct cash support that many investors have been hoping for.

The measures are “very small steps”, said Mr Larry Hu, head of China economics at Macquarie Group, adding that policies targeting property and infrastructure would likely have a bigger impact on the economy.

Chinese policymakers have been cautious in 2023 about rolling out stimulus, having trimmed policy rates just once while mostly relying on targeted measures such as extending tax exemptions on electric car purchases.

Last week, the authorities also extended loan relief to developers, an effort to shore up a property sector in crisis.

While plans intended to spur sales of home appliances and electric vehicles can provide some help, they fall short of being a “game changer” in the way measures intended to stabilise property demand would, Mr Hu said.

Policies channelling funding into infrastructure via policy banks and special bonds would also benefit the economy, he added.

Monday’s official economic data prompted several banks, including Citigroup, to cut their growth forecasts for China in 2023, with some even warning that the government’s 5 per cent target was now at risk.

China’s recovery had been driven by consumption earlier in 2023, but momentum is now waning.

It will be tough for the measures to have an impact on the macro economy, given sluggish consumer confidence, said Mr Xing Zhaopeng, senior China strategist at Australia and New Zealand Banking Group. 

“I think policies should focus on confidence,” he said.

He pointed to measures such as a new pilot programme in eastern Zhejiang province that will remove restrictions on household registrations in most areas as more promising for consumption. BLOOMBERG