Logo 23 Oct 2024

Economic policy support pivots to households

Policymakers are gearing up to provide more support for households.
The Politburo first announced the mindset shift at a July 30 meeting, where they stated:

“The focus of economic policy should shift more towards improving people’s livelihoods and boosting consumption.”

Premier Li Qiang made sure ...

Policymakers are gearing up to provide more support for households.

The Politburo first announced the mindset shift at a July 30 meeting, where they stated:

  • “The focus of economic policy should shift more towards improving people’s livelihoods and boosting consumption.”

Premier Li Qiang made sure the rank and file got the message at an August State Council plenary session, when he told senior officials:

  • “Stronger efforts are needed to expand domestic demand, with a focus on boosting consumption.”

Key economic ministries have responded:

  • On October 8, the macro planner (NDRC) announced that central government ultra-long treasury bonds would be used to fund investments in schools and hospitals in cities experiencing population inflows.
  • At a financial forum on October 18, central bank (PBoC) Governor Pan Gongsheng emphasized that macroeconomic policy must shift focus from investment “to give equal weight to both consumption and investment, with greater attention on consumption.”

The increased focus on supporting households is also evident in recent stimulus measures, which include:

  • Lowering existing mortgage rates, saving households approximately RMB 150 billion annually in interest payments.
  • Additional fiscal support for the consumer goods trade-in program, which subsidizes up to 20% of households' purchases of cars, electronics, and furniture.

Get smart: The market is focused on the ultimate size of the stimulus package, but where the government targets its spending is just as critical.

  • Historically, the government has focused fiscal support on industry and infrastructure.
  • Directly supporting households will more effectively boost consumption and address economic imbalances.

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