China is set to enhance its economy by significantly boosting consumer spending through increased wages and reduced financial pressures. This initiative, announced by the Chinese Communist Party's central committee and the state council, aims to foster consumer confidence and stimulate economic growth. The strategy includes plans to ensure "reasonable wage growth" and improve the system for adjusting minimum wages.
The government also intends to introduce subsidies for childcare, a significant financial concern for young adults, and unlock potential earnings for homeowners. Additionally, it seeks to promote emerging markets like AI-driven products and encourage tourism focused on snow and ice activities.
A report from the official state media, Xinhua, highlighted that the plan aims to link consumer spending with broader social goals such as enhancing elderly care, supporting childcare, and improving work-life balance. This approach positions consumption growth as a means to improve quality of life, not just as an economic target.
Fu Linghui, a spokesperson for the national statistics bureau, mentioned that while the economy is on a positive trajectory, challenges remain both domestically and internationally. He noted that the external environment has become more complex, domestic demand is weak, and some businesses are struggling, indicating that the economic recovery is still fragile.
This announcement followed China's Two Sessions political meeting, where a 5% growth target was set for the economy. Recent data showed consumer prices had entered deflation for the first time in a year. The new measures positively impacted many Asia-Pacific stock markets, with gains in South Korea, Hong Kong, and Australia, although Chinese investors were less optimistic, leading to a slight decline in the CSI 300 index.
Despite mixed economic data, including increased retail spending but rising unemployment and falling house prices, the national statistics bureau reported that the economy maintained positive development in the first two months of the year. However, it acknowledged that domestic demand remains weak and the foundation for sustained growth is not robust.
China's economy met its 5% growth target in 2024, marking the slowest rate since 1990, excluding the pandemic period. The economy has been affected by a property market crisis, lingering low spending post-pandemic, and high youth unemployment rates.
In November, the government announced a 10 trillion yuan debt support package for local governments but has avoided large-scale stimulus measures that analysts suggest are necessary. The country is also dealing with an ongoing trade conflict with the US, as former President Donald Trump considers expanding tariffs on Chinese exports, potentially influencing other nations to impose similar measures.
Zhiwei Zhang, president and chief economist at Pinpoint Asset Management, warned that the impact of higher US tariffs on Chinese exports might become evident in upcoming trade data.