As the latest outbreaks of COVID-19 wane and a three-day holiday begins on Friday, many places in China are handing out billions of yuan in vouchers and subsidies to support domestic consumption.
In one of the latest such initiatives, the central city of Zhengzhou, capital of Henan province, announced that it would issue vouchers worth 240 million yuan (about $36 million) from the end of May to August to encourage local spending.
Meanwhile, southern China’s economic powerhouse Shenzhen began handing out the third batch of its 400 million yuan vouchers over the weekend, which could be spent on deals for the festival. June 18 shopping event hosted by Chinese e-commerce giant JD.com.
The massive voucher distribution comes at a time when the Omicron outbreak has weighed heavily on China’s domestic consumption, particularly sales of daily necessities and the catering sector, in the first four months of 2022.
Retail sales of consumer goods, a significant indicator of the strength of Chinese consumption, fell 0.2 percent year on year in the January-April period, official data showed.
In April alone, retail sales fell 11.1% year on year, marking the biggest drop since March 2020, and falling further after falling 3.5% the previous month, according to the National Bureau of Statistics. statistics (NBS).
Shopping vouchers proved to be a powerful lever to boost spending when the COVID-19 epidemic hit the country in 2020. The 500 million yuan vouchers issued by the local government of Wuhan, the largest Chinese city hardest hit by the epidemic, boosted consumption by more than 5 billion yuan.
“Vouchers stimulate consumption instantly,” said Pan Helin, a researcher at Zhejiang University, noting that with certain spending rules in place, vouchers can stimulate demand and amplify the effect of tax funds. .
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A study by Peking University in 2020 showed that in Hangzhou, capital of eastern China’s Zhejiang province, each government-issued voucher worth 1 yuan can generate 3.5 yuan in additional expenses, while in less developed regions such as Guangxi Zhuang Autonomous Region, the additional amount could reach up to 7.7 yuan.
The distribution of vouchers mainly targets large purchases such as automobiles, household appliances and furniture, as well as sectors affected by the epidemic such as restaurants, hotels and cultural activities. In Shanghai, the local government offered a 10,000 yuan subsidy to consumers who replace old cars with electric cars.
Xu Yongjun, general manager of a car dealership in Tongxiang City, Zhejiang, said his store saw a nearly 40 percent increase in sales after the local government issued 8 million yuan in vouchers. ‘purchase.
“The pent-up consumption will be gradually released with the containment of the epidemic and people’s production and life returning to normal,” said Fu Linghui, spokesperson for the BES.
Zhong Zhengsheng, an economist at Pingan Securities, said he plans to distribute more vouchers in more cities to further facilitate the recovery in consumption.
Zhong also emphasized efforts to help market entities overcome difficulties, which would boost employment and, in turn, increase people’s willingness and ability to spend.
China’s Ministry of Commerce pledged last month to promote consumption by improving traditional consumption, accelerating the development of new consumption patterns and improving consumption platforms, so as to strengthen consumption’s catalytic role in economic traffic.
The impact of the virus on consumption is “temporary” as the strong resilience, great potential and solid fundamentals of long-term development of Chinese consumption remain unchanged, said ministry spokesperson Shu Jueting.
(Contributed by Xinhua)