I'm Robert Lawrence Kuhn and here's what I'm watching: China's economy in 2023. This Watcher, the fifth of a five-part series, focuses on China's strategy for encouraging and stimulating domestic consumption.
The Central Economic Work Conference, meeting in December to set policy guidelines for 2023, was candid in its diagnosis and authoritative in its prescriptions.
The recovery and expansion of consumption is top priority, and to make it happen, after almost three years of rolling lockdowns and lingering uncertainties, winning back consumer confidence is essential. This must "start with improving public expectations and boosting confidence for development" and must include "better coordinating epidemic prevention and control with economic and social development." No one underestimates the challenge.
While in response to the pandemic, China has not provided cash grants to households, as did the U.S. and other developed countries, its 2023 plan is to increase urban and rural personal income through multiple mechanisms. Several local governments, such as Gaoxin district in Chengdu, Sichuan Province, and areas of Guangdong, Hainan, Jiangsu and Xinjiang have tried vouchers to revive consumption — for food, home appliances, cars, even travel — but there seems no appetite for a nationwide voucher rollout. National consumption-directed stimulus programs will be targeted, such as for new energy vehicles.
In support, economists point out that consumption vouchers are not designed for sustainable consumption recovery, because the real constraint is household income. A more effective means of encouraging people to spend money as the country reopens, they say, is to ensure that they have stable jobs and sufficient income through supply-side support measures, which should boost consumer spending as a second-order, derivative effect — although its success depends on how fast the private sector responds.
Here are some key indicators to track the improvement of China's economy and of the Chinese people's livelihoods: retail sales, obviously; also, migrant workers returning to urban and industrial areas; the urban unemployment rate falling, and a net increase in urban employment.
Critical for China, sure; but also for the world. There are few things more vital to the global economy than China's domestic demand and consumption.
I'm keeping watch. I'm Robert Lawrence Kuhn.
Script: Robert Lawrence Kuhn
Editors: Yang Yutong, Hao Xinxin
Designer: Qi Haiming
Producer: Wang Ying
Supervisors: Ge Jing, Adam Zhu
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