Effective in Encouraging Consumption but Faces Policymaker Resistance
Average Spending Declines... Needs Macro-Level Approach
A prominent Chinese economist has argued that issuing cash coupons to stimulate the economy is urgent. He also drew attention by explaining that there are lessons to be learned from major countries such as the United States, Japan, and Korea.
On the 22nd, China’s First Financial and Economic Newspaper reported that Teng Tai, director of the Wanbo New Economy Research Institute, said in an interview with the media, "China should refrain from inefficient infrastructure investment and learn from other countries to issue cash coupons to solidify consumption growth." Director Teng explained, "We need to learn from the United States, Japan, Korea, Australia, and Singapore," adding, "The most effective way to encourage consumption is to issue cash (coupons)."
He stated, "Compared to Europe, the United States, and Australia, China is in a more urgent situation to issue cash coupons," and claimed, "By eliminating inefficient infrastructure, about 52 trillion yuan (approximately 959.4 trillion won) was saved in 2022, which can be converted into disposable income." He explained that this amount accounts for 43% of China’s Gross Domestic Product (GDP).
As of last year, China’s per capita disposable income was 39,218 yuan, which is far less compared to the United States’ 61,242 dollars (approximately 81.39 million won). Director Teng emphasized, "We must recognize that consumption is not waste," and added, "Consumption is where the economic cycle begins and ends." He also stressed, "Lack of consumption is one of the obstacles to the economy," and insisted, "This problem must be resolved."
Recently, during the Chunje holiday period, domestic tourism and the movie market in China showed rapid improvement in service consumption. However, experts diagnose that consumption is still sluggish, noting that average spending per person decreased by 9.5% compared to 2019.
Regarding this, Lewis Luo, chief economist at Oxford Economics, told Hong Kong’s South China Morning Post (SCMP), "The sustainability of strong spending patterns remains a key variable in the macro outlook," and explained, "With the real estate downturn continuing and consumer confidence still weak, more policy easing is needed."
Christopher Beddo, deputy head of China research at consulting firm Gavekal Dragonomics, told SCMP, "Chinese policymakers are very skeptical about providing cash to households," adding, "They have often expressed concerns about welfare, and some scholars argue that stimulus through infrastructure construction at least creates sustainable assets." Marcus Lach, associate professor of marketing at Shenzhen Technology University’s Business School, referred to last year’s case of issuing consumer vouchers in Hong Kong, emphasizing that the set 'expiration date' is the 'best incentive' to prompt consumer action.
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