Difficulties in Stimulating Consumption: Audit Shows that China’s Consumer Vouchers are not Effective
02.08.2023
According to a report by Chinese media Caixin.com, several provinces have audited and found that the consumption vouchers issued by various regions during the epidemic have not been effective in stimulating consumption and are difficult to manage. And the method of directly distributing cash with greater economic stimulus is also difficult to realize in the near future.
Audit departments in several provinces in China have found that local consumer coupons issued in various places from 2020 to 2022 have not only been abused but have had little effect on boosting the consumer market. In Guangdong Province, which has a huge economic scale, the audit department found that the threshold for using consumer coupons is too high, the discounts are too small, and the promotions are too weak. The auditing department of Shandong Province also released a report last week, saying that the management of the issuance of consumer vouchers was chaotic, and many data were missing for no reason. The report pointed out that some counties arranged a budget of 10,000 yuan, but the actual expenditure was only 935 yuan, benefiting three merchants. This also highlights the limitations of consumer vouchers in poor areas.
The audit report of Hainan Province two weeks ago also showed that at least 73% of the 8 million RMB consumer vouchers issued could not be written off. There are also 4 cities where the face value of consumer coupons that have not been issued at all has reached 28.12 million yuan.
During the three-year epidemic, many local governments in China issued consumer coupons to boost the market. The recent intensive audit reports from various places have made many analysts worry that Beijing will not take more powerful measures to stimulate the market later this year.
Just on July 31, the Chinese government announced 20 measures to stimulate the consumer market, involving real estate, automobiles, catering, and other fields. The National Development and Reform Commission has issued new regulations requiring governments at all levels to ensure adequate support for first-time home buyers and home improvement buyers. The central government has even ordered local governments to “stabilize mass consumption” by refraining from new climate-friendly car purchase restrictions.
Analysts pointed out that the key obstacle to the consumer market is that households have pessimistic expectations for long-term employment income, but Beijing can do nothing about this crux for the time being.
The Economist Intelligence Unit (EIU) released a report on August 1 that due to the general uncertainty in income expectations and employment prospects, weak consumption will remain the main drag on China’s economic recovery. The think tank suggested that consumer subsidies should be increased and family-focused fiscal transfers should be implemented to boost the consumer market.
In 2022, consumption will only contribute 32.8% of China’s GDP growth, which is significantly lower than the 54.5% in 2021. The main reasons for the weakening of consumer confidence include the stringent new crown epidemic prevention measures and the increasingly volatile international geopolitical environment. After the full relaxation of epidemic prevention in December last year, China did not usher in the long-awaited strong economic recovery. GDP in the second quarter of this year was only 6.3% higher than the same period last year when the epidemic was raging, far below analysts’ expectations. Real estate investment even fell 7.9% year-on-year. At the same time, the youth unemployment rate hit a record high in June this year, reaching 21.3%.
(Caixin.com, South China Morning Post)
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