Tue, 18 Mar 2025

Tue, 18 Mar 2025 Why is China spending billions to get people to open their wallets?

Beijing hopes better wages and discounts can enocurage spending and stave off greater economic trouble.

* The Chinese government has announced new child care subsidies, increased wages, and better paid leave in an effort to revive a slowing economy.
* Beijing has also launched a $41bn discount programme for various products, including dishwashers, home decor, electric vehicles, and smartwatches.
* Despite this, China's economy is still struggling with deflation (falling prices), which can lead to lower consumer spending and economic stagnation.
* The main reason for low consumption in China is that households either don't have enough disposable income or are too cautious to spend due to the pandemic and economic uncertainty.
* Chinese consumers have become more frugal since the pandemic, with even high-end brands such as LVMH, Burberry, and Richemont reporting sales declines in China.
* The government's plan to boost domestic demand faces challenges, including restoring consumer confidence among a generation of Covid graduates struggling to own a home or find a job.
* Some analysts doubt that China's leaders want to create a consumer-driven economy, as it would require shifting power from the state to the individual and potentially reducing the role of state-controlled banks in funding key industries.
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