China Plans to ‘Vigorously Boost Consumption’ to Shore Up Economy
The Chinese government has unveiled ambitious initiatives to “vigorously boost consumption” by increasing wages and reducing financial burdens. These measures are part of the country’s latest efforts to enhance consumer confidence and stimulate its struggling economy.
Announced by the ruling Chinese Communist Party’s (CCP) central committee and state council, the plans aim to “promote reasonable wage growth” and improve mechanisms for adjusting the minimum wage. Additionally, the government proposes introducing subsidies for childcare, a significant financial burden for many young adults, which discourages them from having children. These steps are intended to unlock earnings potential for homeowners, promote emerging markets such as AI-powered products, and encourage snow and ice tourism.
A report from the official state media outlet, Xinhua, highlighted that by linking consumer spending with broader social goals like childcare support, work-life balance, and elderly care improvement, the plan seeks not only to drive economic growth but also to enhance the overall quality of life for citizens.
Fu Linghui, a spokesperson for the national bureau of statistics, remarked that while the economy is moving in the right direction, challenges persist both domestically and internationally. “The external environment has become more complex and grim, domestic effective demand is insufficient, some companies are facing difficulties in production and operation, and the foundation for the continuous recovery of the economy is still unstable,” Fu explained.
The announcement follows China’s Two Sessions political meeting, where the CCP set an expected 5% growth target for the economy. However, data had recently revealed that consumer prices fell into deflation for the first time in a year.
The news boosted many Asia-Pacific stock markets, and stocks in South Korea, Hong Kong, and Australia closed higher. However, the response was more subdued among mainland Chinese investors, with the blue-chip CSI 300 closing 0.2% down.
In the wake of mixed domestic economic data from Beijing, reports indicated that while retail spending had increased compared with the previous year, unemployment reached its highest level in two years, and house prices declined in nearly all medium and large cities. “In the first two months, with the sustained effects of macro policies, the national economy maintained the new and positive development,” stated the national bureau of statistics. However, it acknowledged that domestic effective demand was weak and that the foundation for sustained economic growth and recovery was not sufficiently strong.
Although China’s government reported that the economy reached its 5% growth target in 2024, this still marked the country’s slowest growth rate since 1990, excluding the pandemic period. The economy continues to grapple with a property market crisis, lingering low spending post-pandemic, and record-high youth unemployment rates in recent years.
Last November, the government announced a substantial 10tn yuan (£1.1tn) debt support package for local governments, but it has hesitated to implement the large-scale stimulus measures that some analysts deem necessary.
Complicating matters further, the country faces a prolonged trade war with the United States, as President Donald Trump proposes further expanding tariffs on Chinese exports. This measure could potentially persuade other countries to implement their levies.
The risk to China’s economy lies in the potential damage from increased US tariffs on its exports, which could soon become evident in trade data. These challenges underscore the need for the country’s new initiatives to revitalize its economic landscape amidst a complex global environment.
