China looks to boost consumption with ‘comprehensive measures’ to help economic recovery

The State Council says it is looking to expand demand by boosting property and car sales, as well as subsidising green energy products

The service sector has been badly hit by the country’s Covid policies, threatening to derail the annual growth target of ‘around 5.5 per cent’

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Consumption is a key driver of economic growth. Photo: Xinhua

Published: 6:02pm, 30 Jul 2022Updated: 11:19am, 1 Aug 2022

Beijing hopes to boost its economic recovery by rolling back restrictions on car and property sales and offering tax breaks and subsidies for environmentally friendly products to boost consumption.

The measures, announced at Friday’s executive meeting of the State Council, China’s cabinet, may reflect the reality that service sectors – such as catering, retail, tourism and transport – will continue to face pressure as a result of the country’s zero-Covid policies in the second half of the year.

“We must take comprehensive measures to expand effective demand,” Premier Li Keqiang told the meeting.

The comments echoed the quarterly economic conference of the 25-member Politburo the previous day, which tried to strike a balance between growth, Covid control and security, and ordered all regions and leading party cadres to “strive for the best [economic] outcome”.

The cabinet meeting, which emphasised the importance of policy enforcement, underscored the key role of effective investment in helping the economic recovery after the second quarter growth rate of just 0.4 per cent threatened to derail the full-year growth target of “around 5.5 per cent”.

While trying not to have a big stimulus, the Chinese authorities have tried to use government spending and policy bank instruments to fund transport, energy, logistics, agriculture and new infrastructure. Funding, however, remains a big market concern as this year’s local special-purpose bond quotas run out.

Consumption, which was barely mentioned in Thursday’s Politburo statement, was positioned as a major economic growth driver, despite being hit hard by the pandemic. However, current economic, job and income uncertainties are a further threat to its recovery.