Coronavirus: China trying vouchers to boost consumer spending, but effort modest compared to HK, US
- Local governments across China have begun handing out prepaid vouchers to boost consumer spending disrupted by coronavirus containment measures
- But the direct handouts are much smaller than direct stimulus packages announced in Hong Kong and planned in the US
China’s central government has endorsed efforts by local governments to distribute prepaid vouchers worth billions of yuan to lift consumer spending amid the coronavirus outbreak, although the packages pale in comparison with direct handouts announced by the Hong Kong government and planned in the US.
The National Development and Reform Commission (NDRC), the country’s top economic planning agency, said it was closely watching voucher programmes in a number of cities and urged other local governments to consider similar measures based on their budgetary leeway.
“We are directing local governments to implement policies to expand consumer spending … and also support local governments launching pragmatic and effective measures in a targeted manner,” Ha Zengyou, deputy head of the employment and income distribution department of the NDRC, said on Wednesday.
Despite applauding the local initiatives, China’s central government has rejected the idea of a nationwide handout as outlandish.
Unlike Hong Kong’s plan to provide HK$10,000 (US$1,287) to each permanent resident or the proposal in the United States for direct handouts to Americans, China feels more comfortable pumping money into its banking system, its state-owned sectors and its massive bureaucratic apparatus to help the economy.
The White House scaled up its proposed relief bill on Wednesday to US$1.3 trillion, including US$500 billion in handouts that would see almost US$2,000 go to each American. Meanwhile, the European Central Bank announced on Wednesday an unexpected €750 billion (US$821 billion) emergency programme to buy government and corporate debt to add cash to the economy.
The relatively small size of the Chinese programme so far highlights the country’s restrained approach to offsetting the economic impact of the coronavirus pandemic compared with what is being done elsewhere.