China has announced a new policy package to boost household spending by tightening coordination between commerce and financial regulators, expanding access to credit and promoting new forms of consumption.
The move comes as soft retail sales and weak consumer confidence continued to weigh on economic growth last month, highlighting the urgency for policymakers to expand domestic demand. That priority has topped the agenda of the central economic work conference – an annual gathering of the Central Committee of the ruling Communist Party and the State Council, China’s cabinet – for two consecutive years.
Analysts said the support could intensify in the new year, with the focus likely shifting towards service-sector spending rather than big-ticket goods.
The 11-measure policy package includes steps to further expand personal consumer lending and channel more credit towards high-potential areas – including green, health, digital and “AI Plus” consumption – according to a notice released by the Ministry of Commerce, the People’s Bank of China and the National Financial Regulatory Administration.
It also encourages eligible local governments to use digital yuan “red packets” to improve the effectiveness of consumption incentives.
“Local commerce authorities are encouraged to make full use of existing funding channels, actively roll out consumption-boosting initiatives, and work in tandem with financial support measures to better unlock consumer demand,” the notice issued on Sunday said.
Policymakers are treating economic rebalancing as a system-wide project, “with boosting consumption targets embedded into multiple government agencies’ KPIs [key performance indicators],” said Xu Tianchen, senior China economist at the Economist Intelligence Unit.
“The year-end roll-out signals policymakers’ intent to get ahead and prepare in advance, allowing measures to take effect from the start of the new year rather than waiting for March’s ‘two sessions.’”
The financial support outlined in the latest policy package is ample, but credit demand remains weak, Xu said. Consumer stimulus is likely to stay strong next year, with the emphasis shifting towards services such as skills training, maternal and childcare services, healthcare and elderly care amid a rapidly ageing society, he added.
Retail sales, a crucial gauge of consumer spending, grew by just 1.3 per cent year on year in November, according to data released by the National Bureau of Statistics on Monday.
That marked the slowest growth since December 2022, with sluggish auto sales a significant drag, analysts said.
With consumer confidence still subdued, the central economic work conference, which concluded on Thursday, acknowledged persistent headwinds – underscoring the pivot towards domestic demand through measures to boost consumption, stabilise investment and promote innovation in high-productivity sectors.
President Xi Jinping said expanding domestic demand concerns “not only economic stability but also economic security – it is not a temporary fix, but a strategic choice,” according to an article drawing on his major policy statements over the past decade, set to be published on Tuesday in Qiushi, the Communist Party’s flagship theoretical journal.
“China must move faster to address weaknesses in domestic demand, particularly consumption, so that it becomes the main engine and stabilising anchor of economic growth,” he said.
“Insufficient aggregate demand is the most prominent challenge facing the economy,” he added, calling for long-term mechanisms to boost household spending by ensuring stable incomes, easing concerns about the future and improving the consumption environment.
Xi also stressed the need to better align improvements in livelihoods with consumption stimulus, combining “investment in physical goods” with “investment in people” and removing bottlenecks hindering the development of a unified national market.
Even so, consumption-oriented policy support remains “incremental rather than decisive,” according to an Oxford Economics report published on Monday.
“Authorities are likely weighing an expansion of this year’s trade-in programmes alongside additional, targeted housing measures on both the demand and supply sides,” the authors said. -- SOUTH CHINA MORNING POST
