MNI: Special Treasuries To Boost China's Consumers In 2025
MNI (BEIJING) - China will likely increase support for consumer trade-ins via additional special treasury bonds next year, while providing low-income groups subsidies to boost domestic demand given uncertainty over global trade in 2025, advisors and analysts told MNI.
"Funding for consumer trade-ins is expected to grow by at least 50% from this year’s CNY150 billion through the issuance of special treasury bonds," said Lian Ping, chairman at the China Chief Economist Forum. Outstanding special treasuries could expand to as much as CNY2 trillion next year from 2024's CNY1 trillion to support growth through various channels, including subsidies for low-paid workers, he added.
However, authorities will need to issue about CNY2 trillion of special treasuries to strengthen the economy, particularly if the government again targets 5% GDP growth next year amid likely U.S. tariff increases, said Shen Jianguang, chief economist at JD Groupand adjunct professor at Fudan University.
Funds directed to the trade-in scheme should increase by CNY100 billion to CNY250 billion due to its success boosting whitegoods sales, while its scope should also expand to include electronic devices, such as smartphones, Shen argued.
Home appliances, office supplies, furniture and automobile sales grew by 39.2%, 18.0%, 7.4% and 3.7% y/y in October, largely driven by trade-in subsidies, contributing 1.2 percentage points to headline retail sales growth, which rose 1.6 pp to 4.8% in October, he added.
Retail sales will likely grow a further 5% this year, but further gains will require a boost to services consumption, such as catering, Shen added, arguing authorities could use CNY250 billion of special treasury proceeds to provide coupons for the sector.
INCOME GROWTH
Authorities need an additional CNY500 billion to subsidise lower-income households, along with greater central-to-local government transfers to boost public welfare, clear corporate arrears, and pay civil-servant salaries to restore expectations and address high levels of precautionary savings, Shen added.
Analysts from the Bank of China Research Institute calculated a 20% increase to this year’s CNY154.7 billion subsidy fund for needy people could drive 0.3 pp of final consumption growth, given rural residents typically spend 82.7% of their income.
U.S. president-elect Donald Trump’s promised tax cuts could also weaken the yuan and lead to capital outflows, further pressuring the country’s stock market and house prices, and dampening consumption through negative wealth effects, Shen added. He called for a stock market stabilisation fund and a national-level fiscal fund to buy up housing and land surplus to help offset the impact.
Lian argued safeguarding residents’ property income would require stabilisation funds for both the real-estate and stock markets, with an initial CNY1 trillion and CNY3 trillion scale, alongside the removal of home purchase limits and a boost to credit lines to ensure house delivery. The decline in real estate, which accounts for about 60% of residents' assets, had dragged down retail-sales growth by 3.6 pp in the first three quarters of this year, he continued. (See MNI: China’s Property Measures Face CNY2 Trln Funding Gap)
Authorities could improve broader economic prospects by cutting policy interest rates and the reserve requirement ratio to maintain ample liquidity, while increasing rural-to-urban migration, which would release CNY1 trillion a year of additional consumption, Lian said. The opening of China’s services sector needed to accelerate given the current supply shortage in education, medical and elderly care, Lian added. (See MNI INTERVIEW: PBOC To Ease Further In 2025 - CITIC's Ming )
Additionally, the government should ensure fair treatment and strengthen support for private firms, which will increase wages for ordinary people and operating income for high-net-worth groups, Lian noted.