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China vows to ‘restore and expand' consumption to boost growth

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  • China's continued economic recovery is still faced with insufficient demand, weak momentum, and weak confidence, according to the National Development and Reform Commission.
  • Policies will be aimed at stabilizing large scale consumption, promoting the consumption of automobile and electronic products, expanding rural consumption, and optimizing the consumption environment, NDRC said.
  • China's Commerce Ministry followed with an announcement of an 11-point plan to boost the domestic consumption of household consumer goods and services.

China's top economic state planner vowed Tuesday to "restore and expand" consumption in a wide-ranging plan to bolster growth that includes boosting household income, improving business environment for private firms and stabilizing youth employment.

China's continued economic recovery is still faced with insufficient demand, weak momentum, and weak confidence, Jin Xiandong, an official with the National Development and Reform Commission, said Tuesday at the agency's monthly press conference in Beijing, according to a CNBC translation.

"Consumer purchasing power and expectations are relatively weak, while consumption infrastructure and environment need to be improved," Jin added.

On Monday, a raft of weaker-than-expected economic data provided more basis for market watchers to renew calls for policy support to bolster growth. Chinese leaders have signaled in recent weeks they are likely to be judicious and targeted in their policy support.

China's GDP for the second quarter grew 6.3% from a year ago, missing market expectations for 7.3%. It marked a 0.8% growth compared to the first quarter, and was slower than the 2.2% quarter-on-quarter pace recorded in the January to March period.

Even with a low base from last year, given the Covid lockdown in Shanghai, retail sales growth slowed to 3.1% in June from a year before, compared to 12.7% in May.

"We will promptly formulate and introduce policies to restore and expand consumption, and issue policies to stabilize large scale consumption, promote the consumption of automobile and electronic products, expand rural consumption, and optimize the consumption environment" Jin added.

"Effective policy measures will be implemented as soon as possible."

Within hours, Commerce Ministry followed with an announcement of an 11-point plan to boost the domestic consumption of household consumer goods and services.

This included a directive to local governments to step up the renovation of old homes, a pledge to encourage improvements to online commercial platforms, and to develop the concept of "15-minute cities."

Youth unemployment

The state planner also vowed to address record youth unemployment in China, which came in at 21.3% in June — almost four times the regular rate of urban unemployment at 5.2%.

In response to employment issues relating to particular groups such as college graduates, Jin said, the NDRC will "increase service and policy guarantees, step up support for job stabilization and expansion."

Jin said the NDRC will also work to help young people harness their innovative and entrepreneurial energy, strengthen employment services for youths and step up the development of vocational education so that college graduates are more employable.

The NDRC will also work to improve wages, ensuring that wage growth commensurate with economic growth.

Economists generally see reasonable wage growth as an important aspect of boosting consumer confidence and consequently, economic growth.

Private, foreign businesses

Another NDRC official Li Hui said the Chinese state planner will deepen the reform of state-owned enterprises, while removing institutional barriers to help private companies become more competitive.

The agency will also increase engagement with the private sector to better understand their needs and demands and evaluate policy effectiveness, she said.

Separately, Jin said the NDRC will step up efforts to attract foreign investment. They include improving communication with various foreign chambers of commerce to understand and resolving issues in a timely manner.

The pledge echoes remarks made by President Xi Jinping in June, when he said China will "vigorously promote high-level opening up and better protect the rights and interests of foreign investors per the law."

This comes as Washington is considering curbs on U.S. investment in China amid an escalating global battle for technological supremacy.

Earlier in July, Beijing slapped export curbs on chipmaking metals and its compounds — which China's Ministry of Commerce claimed to have given the U.S. and Europe advance notice. In October, the U.S. launched sweeping rules aimed at cutting off exports of key chips and semiconductor tools to China. 

Copyright CNBC
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