BEIJING – China’s policymakers plan to show more support for domestic demand this year but are likely to stop short of splashing out big on direct consumer subsidies, keeping their focus mainly on investment, three sources close to policy discussions said.
In recent weeks, top policymakers have repeatedly signaled their intention to work towards harvesting the consumer power of China’s 1.4 billion people, after economic growth in 2022 slumped to one of its weakest levels in nearly half a century.
That has raised expectations that large-scale household stimulus measures could be announced at an annual parliament meeting in March. Prominent academics have felt emboldened to speak publicly about sizeable demand-side measures such as 1 trillion yuan ($148.28 billion) or more in nationwide consumption vouchers.
The sources close to policy discussions, however, expect China to stick more closely to its familiar playbook of policies to support key industries and splurge on infrastructure, aiming to shore up jobs and incomes which will eventually lift consumer sentiment off record lows.
“There are limited options to stimulate consumption,” said one insider, who like the other sources spoke on condition of anonymity due to the closed-door nature of policy debates.
“The possibility of giving cash handouts is small.”
China’s National Development and Reform Commission, the top state planner, did not immediately respond to a request for comment.
Last year was dismal for Chinese consumers, who bore the brunt of harsh COVID-19 curbs that were abruptly lifted in December. Retail sales fell 0.2 percent, the second worst performance since 1968, while per capita disposable income rose just 2.9 percent, the second smallest rise since 1989.
Many economists have argued for years that the world’s No. 2 economy should rebalance, relying more on domestic consumption and reducing its reliance on debt-backed investment, which now produces more debt than growth.
Reviving consumer demand quickly is even more critical for an economic recovery this year as the country’s exports falter amid a global slowdown and the crisis-hit property market struggles to get back on its feet.
But policymakers’ apparent reluctance to veer too swiftly, or too far, from their old investment playbook highlights the difficulty of any rebalancing act for the $18 trillion economy.
Since the Communist Party’s Central Economic Work Conference in December, top policymakers have repeated their intention to boost consumer’s spending power, without saying how.
President Xi Jinping said on Wednesday that China should take steps so that consumers “dare to spend without worrying about the future.” – Reuters
