China’s $ 41 billion plan to promote consumption is just one beginning

Beijing – China’s latest step to promote consumption is not to shock all types of expenses.

Policy makers last week doubled the subsidy for a consumer trade-in program for 300 billion yuan ($ 41.47 billion) this year, which matches the market expectations-and again the clear steering of cash handouts. The subsidy will lead to about 15% to 20% of the purchase price for select products, including mid-range smartphones and home appliances.

This is an expansion from last year’s 150 billion yuan program, declared for a narrow range of products in summer.

The new phase of subsidy is “very enough” and will possibly support retail sales, similarly how e-commerce companies promoted sales in some products at the end of last year, Jacob Cook, co-founder and CEO of WIPC Marketing + Technologies, and CEO, told CNBC on Monday.

Although it is suspected that the effect of a one -time subsidy will not last long, Cook said more subsidy programs would be likely to follow. He said that China’s “aggressive” 5% GDP development will indicate more to support the development target and consumption that Beijing would more to support development – without relying equally on the old playbook of infrastructure expenses.

Chinese Premier Lee Kiang gave an annual report on government work last week, promoting consumption as top tasks for the year.

This is the first time in a decade when Beijing, the main China equity strategist Laura Wang at Morgan Stanley, said that Beijing has given such a high priority. He said that the government work report cited “consumption” 27 times – the most mentioned in a decade.

While Beijing has not followed the US or other countries to hand over cash to consumers, Chinese policy makers have accepted the need to combat inflation pressure at home.

China should focus more on domestic demand, given the possibility of “new shocks” for foreign demand, Shane Danang, head of the draft group of the Government Work Report and Director of the State Council Research Office, told reporters on Wednesday in Mandarin translated by CNBC.

Last year, China’s retail sales increased by 3.5%, rapid recession with an increase of 7.2% in the previous year. According to the official data released on Sunday, China’s consumer price inflation fell below zero for the first time in a year.

If prices are very low, it becomes difficult to encourage businesses to invest businesses and increase consumers’ income, Chain Changsheng, Drafting Group member of Government Work Report and Deputy Director of State Council Research Office, said at the same press conference on Wednesday.

He said that the work report called four tasks to address depressed prices: expanding fiscal support, working to raise consumption, using regulation to prevent price wars and making a big effort to stabilize real estate prices.

Real estate is responsible for most domestic money in China. In 2020, a crackdown promoted a recession on the property market leverage, which began to turn at the end of last year-to prevent the fall of the real estate sector after a high-level policy call in September.

Meng Lei, a China equity strategy analyst in UBS Securities, said that the increase in stock market could have a significant impact of stabilizing real estate on increasing the equal consumption of money effects, given that the mainland China has become more strategically important.

In recent months, shares have ralled after China’s excitement announcements.

300 billion for subsidy comes from an increase in special government bonds for 300 billion yuan 2025. China said that last week it is increasing its deficit to 4% as it pursues “active fiscal policy”.

It is also a helping indications that Beijing is getting more trading friendly. Chinese President Xi Jinping held a rare meeting with entrepreneurs last month.

Once businesses become more confident, they can rent more and increase wages. In a high-level meeting last week, the Chinese premiere vowed more efforts to promote the increase in income of residents and reduce the financial burden for minimal income groups.

The authorities promised more support for the care of the elderly, children and comprehensive health care systems, looked at the important steps to increase the country’s security trap, allowing the residents to feel more comfortable expenses.

To some extent, these measures can help reduce the cost of living and release possible consumption, Paan Jiang said, a macro foreign exchange analyst in Nanhua Futures.

Economists have long been called for a structural re -calibration of the income distribution system and have been seen in a meaningful way to stimulate domestic consumption.

Recently the vows indicated that the “The Door (IS) Cracking Open” was still a very gradual movement to be comfortable with “Still” still “still” with more direct support for “Center for China Analysis, the Center for China Analysis, the Center for China Analysis of the Asia Society Policy Institute.

“We are not really in the context of a very tremendous push yet,” he said.

Before more support comes, an underdeveloped social security trap, a depressed job market and low wages have motivated to save homes rather than spending, the deer said.

According to the Economic Cooperation and Development Organization, domestic expenses are less than 40% of China’s GDP, much lower than the international average of about 60%.

The National Development and Reforms Commissions a look at an implementation scheme released on Wednesday, how China is thinking about increasing consumption.

The part that describes the tasks for 2025 begins with an entire section on promoting consumption and investment. The report asks for efforts to “increase spending power” and encourage the development of products and scenarios that will encourage consumers to spend.

But this is not a call to support all types of shopping.

According to the report, the top of the brain for policy makers is the retail sales of the “Big-Ticut item”. China also said that it will reduce the ban on real estate transactions and automobile procurement.

A part of the plan involves developing experience economy – immersive landscape connecting film, video games, tourism and traditional Chinese culture – similar to historical sites associated with last year’s hit video game “Black Myth” in tourists.

Chinese authorities also said that they would improve the system “improve mechanism for regular increment” with the system for the payment days. Employees in China are usually paid less than 10 and many public holidays include days that should be made by working for the weekend.

The report also discussed a continuous plan to subsidize consumer good trade-in and upgradation equipment.

But two parts of the sub-section focused more on investment-developmental talent, infrastructure and ecological projects as well as the manufacture of “security capacity” in basic research for technological innovation and domestic food supply.

National Development and Reforms Commission head Zheng Shanji told reporters on Thursday that China will soon release a more detailed plan to promote consumption.

The initial data promotes China’s initial 81 billion yuan sales in the consumption subsidy announced in January before this month’s parliamentary meeting.

Retail sales of new energy vehicles, for which buyers enjoy trade-in subsidies up to 15,000 yuan, increased about 80% to 686,000 units in February, a year ago, China’s auto industry body figures were shown on Monday.

The February report from late February stated that the sales of smartphones increased by about 65% for sale from January to 20 to January 26 to January 26 to 26 to 26, which grew more than 9.5 million units from the year-old period, “and maintained a high level in the next weeks.

The analysis stated that subsidy is likely that Chinese consumers are being encouraged to change their smartphones before planned, especially when the features of artificial intelligence are gaining prominence. The firm has estimated subsidy in the first quarter to generate at least two to three points of additional increase in the sale of Chinese smartphones this year.