Opinion | China’s consumer spending puzzle is missing a key piece: disposable income
- The State Council has released a new policy package intended to boost consumer spending in areas ranging from cars to tourism
- Central policymakers seem to think that Chinese people have money to spend, but after three years of the pandemic, do they?
Beijing’s repeated plea for consumers to spend more has spawned a popular meme on Chinese social media: why does my government still believe I am rich? And what should I do to let my government know I am actually broke?
The lines contain certain truths about the nature of consumer spending. At the end of the day, people’s level of consumption is determined by their disposable income and expectation of future income. It’s very difficult to ask them to spend more when they are poor, indebted or highly uncertain about the future.
While the Chinese government seems resolute, or even desperate, in asking people to loosen their purse strings, as demonstrated by the latest policy package published by the State Council on Monday, plans on how to increase people’s incomes were distinctly omitted.
The outlined measures, which cover a wide range of areas from new energy vehicles to tourist attraction tickets, are based upon the notion that Chinese consumers have the ability to spend, and that supply-side tweaks – such as prolonging the opening hours of restaurants – can unleash hidden consumer power.
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Premier Li Qiang plays up China’s economic prospects at World Economic Forum’s ‘Summer Davos’
Those measures may have a point: China’s household savings in 2022, for example, increased by 17.8 trillion yuan (US$2.49 trillion).
