The Inner Street Culture Creative Park is bustling with activity during the night market in Qingxiu district, Nanning, Guangxi Zhuang autonomous region, on April 16, 2024. [Photo/VCG]
China has fleshed out policy steps to shore up consumer spending, with a focus on increasing people's income and expanding the consumer goods trade-in program, after the country made consumption-boosting efforts its top priority during the recent two sessions, annual meetings of the nation's highest legislative and political advisory bodies.
These pro-consumption initiatives will not only help the world's second-largest economy hit its target of around 5 percent growth this year in the face of external uncertainties, but will also facilitate its transition to a more consumption-led economy, experts said.
The General Office of the Communist Party of China Central Committee and the General Office of the State Council, China's Cabinet, issued a special action plan on Sunday to boost consumption, in an effort to tackle the key challenges affecting consumer confidence and purchasing power.
The plan comes on the heels of the two sessions, at which policymakers earlier this month set the country's deficit-to-GDP ratio at the highest level on record, in order to provide a much-needed boost to the nation's tepid consumer appetite.
The promotion of increased income for urban and rural residents was given high priority in the action plan, through steps such as supporting employment in key sectors to enable reasonable growth in wage-based income, and stabilizing the stock market to expand property-based income.
In the wake of the policy measures implemented since September last year, China's stock markets and real estate sector have shown clear signs of a rebound, said Guo Chunli, vice-president of the Chinese Academy of Macroeconomic Research.
"The upward trends have helped to stabilize asset prices, which is a crucial prerequisite for consumers to feel more secure about their financial situation and be more willing to spend," Guo said, adding that improving consumer confidence is a key component of the country's broader efforts to meet its growth target of around 5 percent for 2025.
As these policy support measures continue to bear fruit, the housing markets in higher-tier cities in particular are likely to stabilize and regain footing in the second half of the year and the real estate sector's drag on economic performance, including consumption, is likely to diminish, according to a report released on Tuesday by Citigroup.
The country will also ramp up its support for trade-in programs for consumer goods, utilizing more fiscal funds to empower local authorities in expanding these initiatives, according to the action plan.
China announced in its 2025 Government Work Report delivered during the two sessions that it will double ultra-long-term special treasury bonds earmarked for its trade-in program to 300 billion yuan ($41.43 billion) this year.
The incentive, an expansion from last year's 150 billion yuan for the program, will cover 15 to 20 percent of the purchase price of a wider range of select products, including midrange smartphones, home appliances and new energy vehicles.
Based on last year's experience, sales generated through trade-ins this year are expected to surpass 2.4 trillion yuan and increase the total growth of retail sales of consumer goods by nearly 5 percentage points, according to China Merchants Securities.
Consumption is critical to China's transition from the old model driven by investment and infrastructure to a new economy that will further elevate the country. This trend has already been observed over the past decade, with consumption consistently increasing as a percentage of GDP, said Ole Gerdau, chief operating officer at Deutsche Bank China, citing the bank's research.
wangkeju@chinadaily.com.cn
