Coronavirus: China handing out more vouchers to spur spending, but cash handout still unlikely

Around 30 Chinese cities have issued 5 billion yuan (US$704 million) worth of vouchers in an effort to help its coronavirus-hit economy

China is still not expected to follow the US, Hong Kong and Japan in giving direct payments to households

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Private consumption accounted for some 60 per cent of China’s economic growth last year, a significant change from the previous model which focused on investment and exports. Photo: Reuters

Published: 8:45pm, 7 Apr 2020Updated: 11:47pm, 7 Apr 2020

A growing number of Chinese cities have joined the race to hand out prepaid vouchers in an effort to revive spending amid the coronavirus outbreak, but there is still little sign that the Beijing is willing to make direct cash payments to consumers.

At least 30 cities across China are issuing vouchers to residents for specific products, although the total amount of 5 billion yuan (US$704 million) represents less than 0.01 per cent of total retail sales in 2019.

Private consumption accounted for some 60 per cent of China’s economic growth last year, a significant change from the previous model which focused on investment and exports.

In contrast to the United States, Hong Kong and Japan where cash is being given directly to households, China’s economic support plan relies in large part on pumping funds into the banking system in hope that it will filter down to small businesses. Local governments are also being handed money to fund new infrastructure projects, which will help employment.

“Cash handouts won’t be able to drive up similar amounts of consumption as people would tend to deposit [the money] in the bank during uncertain times,” said Zhang Jun, chief economist at Morgan Stanley Huaxin Securities.

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