Chinese government officials on Monday outlined steps they are taking to try to boost domestic demand by getting consumers to spend more as a tariff war launched by U.S. President Donald Trump threatens to curb the country's exports.
The central bank will study creating new tools to increase low-cost funding for important consumption areas, said Che Shiyi from the People’s Bank of China, the central bank.
On the spending side, the government has already provided a first tranche of 81 billion yuan ($11.2 billion) to local governments in January for a rebate program to boost auto and appliance sales, announced Li Chunlin, the vice chairman of the National Development and Reform Commission.
The officials spoke at a news conference one day after the government, together with the ruling Communist Party, released a multi-faceted plan to try to boost consumer spending. The moves seemed designed to demonstrate that the government is committed to reviving a sluggish economy.
“While there are few new details on how the government will increase spending, the details of the plan show a greater determination to tackle China’s consumption problem this year,” Lynn Song, the chief Greater China economist at ING bank, wrote in a report on the plan.
New government data released Monday showed signs of improvement in the first two months of the year, though housing market weakness remained a drag on growth.
Retail sales were up 4% in January and February compared to last year, more than forecast. Industrial production rose 5.9%, the National Bureau of Statistics reported. The stronger than expected data helped buoy stock markets in Asia.
A bureau spokesperson said the economy is moving in the right direction but cautioned that challenges remain at home and abroad. Trump has imposed a 20% tariff on Chinese products, which could set back an economy with a high dependence on exports and late on Sunday, he reiterated his intention to push ahead with more tariffs in early April.
“The external environment has become more complex and grim, domestic effective demand is insufficient, some companies are facing difficulties in production and operation, and the foundation for the continuous recovery of the economy is still unstable,” Fu Linghui said at a news conference.
He added, though, that China’s foreign trade has proven resilient.
“China’s industrial system is complete, and its innovation capabilities are gradually improving,” he said. “There is a foundation and conditions for the steady development of foreign trade.”
The long-running real estate crisis has depressed consumer confidence and spending. Real estate investment fell 9.8% in the first two months of the year, the statistics bureau said.
The good news is that real estate price declines have slowed, though they have yet to bottom out. Prices for both new and existing homes fell in January and February, but at a much slower pace than most of last year.
ING bank said it expects real estate prices to stop falling this year but they likely will not rebound quickly.
“February’s data showed that it would be wise for officials not to take their foot off the pedal in terms of policy support,” Song wrote in a report.
The plan released Sunday includes various initiatives, from accelerating the development of artificial-intelligence related products such as autonomous driving and smart wearables to developing winter tourism in parts of the country that get a lot of snow and ice, the official Xinhua News Agency said.
It also included measures to boost spending power by expanding the minimum age, benefits for older people and health insurance for rural residents, Xinhua said.
Earlier this month, the government announced the rebate program, now in its second year, would double to 300 billion yuan in 2025. It offers rebates to people who trade in old appliances or automobiles for new ones.