If China gives cash handouts to low-paid graduates, would they spend it?

Name: China's slow road to economic recovery after dropping its zero-Covid policies
Uploaded: 2023-02-17T23:00:18.000Z
Duration: 4 min 43 s
Description: China's slow road to economic recovery after dropping its zero-Covid policies

Some economists say cash allowances for young people would help stimulate the economy and drive consumption – a major priority set forth by Beijing this year

But in a time of economic uncertainties, with high unemployment among fresh graduates, some say they would mostly opt to save the money for a rainy day

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Beijing has put added emphasis on boosting consumption to stimulate economic growth this year. Photo: AFP

Salina Li

Published: 7:00am, 18 Feb 2023Updated: 7:34am, 18 Feb 2023

It’s a debate as old as stimulus handouts themselves – will recipients spend the money or save it for a rainy day? But the question carries extra weight in a country where the unemployment rate among young people is roughly one out of six, resulting in a relatively large segment of the population contributing very little to consumption.

Some Chinese economists contend that issuing cash allowances to recent university and vocational school graduates would be an effective means of getting young people to spend in an economically difficult post-Covid environment.

But not all experts are on the same page, and some say that the money could simply go unused for years, hoarded away in a bank account to guard against future risks.

And the resulting debate has become particularly relevant at a time when Beijing has greatly prioritised boosting consumption to stimulate the economy.

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China's slow road to economic recovery after dropping its zero-Covid policies

“Cash grants are especially important for vocational students who have graduated in recent years, as the employment situation has been tougher due to Covid-19,” said Guan Qingyou, president and chief economist of the Reality Institute of Advanced Finance, an independent third-party financial capital research platform.

Conceding that it’s a controversial subject, Guan suggested that the government give it a try to stabilise consumption. He was speaking on Wednesday during an online Q&A session hosted by Tencent Finance.