PRC's plan to boost domestic consumption
The push comes as Beijing aims for GDP growth of "around 5%" in 2025
Welcome back to What’s Happening in China, your weekly China brief.
I hope you’ve had a great week.
As signaled at the conclusion of the “two sessions”—the PRC’s most important annual political meetings, where key economic and policy priorities are set—the government is looking for ways to boost domestic consumption. This push comes as Beijing aims for GDP growth of “around 5%” this year, a target that hinges on stronger consumer spending. However, with sluggish income growth, high household savings, lingering concerns about the property market, and a general lack of confidence in the economy, stimulating consumption remains a challenge.
On Sunday, March 16, Beijing unveiled a 30-point plan outlining how the country can achieve that goal, including measures such as raising urban and rural incomes, increasing childrearing and childcare subsidies, and expanding the winter sports economy. Li Chunlin, deputy director of the National Development and Reform Commission, the country’s top economic planning agency, argued that while previous policies focused on the supply side of the economy, “the latest policies also prioritize the demand side, aiming to boost household incomes and ease financial burdens.”
Not everyone is convinced. Michael Pettis, a finance professor at Peking University and expert on the PRC’s economy, noted that while “it is good that Beijing is starting to recognize the limits of the ‘supply drives demand’ model,” shifting that mindset “will take many years,” and “it won’t [be] easy to switch to a model in which only rising demand can justify rising supply.”
At the same time, critics argue that the plan lacks concrete steps. “While it contains laudable goals—such as better enforcement of labor rights and increased payouts for the basic pension system—it does not specify how these can be achieved,” wrote Mary Gallagher, a global affairs professor at the University of Notre Dame. “Unless the central government opens up its wallet to make consumption possible, it won’t materialize by itself,” she said.
Pettis echoed these concerns, noting that “there are some spending support measures that should matter to overall consumption if they are implemented, but it isn’t at all clear who will pay for them. Until that is resolved, it is hard to know how effective the new measures will be.”
Good thing the growth target is “around” 5%.
Let’s jump into it.
— PC
Through the Lens
In Focus
I. How to ‘vigorously boost consumption’
China’s government has announced ambitious plans to “vigorously boost consumption” by putting up pay and reducing financial burdens, in its latest attempt to increase consumer confidence and lift its struggling economy.
The plans, announced by the ruling Chinese Communist party’s (CCP) central committee and state council on Sunday, include aims to “promote reasonable wage growth” and to improve the mechanisms for adjusting the minimum wage.
It also proposed bringing in subsidies for childcare (a financial burden cited by young adults as discouraging them from having children), unlocking earnings potential for homeowners, promoting “emerging” markets such as AI-powered products and encouraging snow and ice tourism.
Read: China plans to ‘vigorously boost consumption’ to shore up economy (The Guardian)
Related: China’s Tax Revenue Declines as Its Leaders Brace for Trump’s Tariffs (The New York Times)
II. Bad bad Li Ka-shing
Hong Kong tycoon Li Ka-shing’s business empire is in the crosshairs after CK Hutchison Holdings chose to sell its Panama Canal port assets to a consortium that includes U.S. investment firm BlackRock Inc., apparently angering Beijing.
Over the past week, Beijing’s Hong Kong affairs offices have posted scathing commentaries from a local state-backed media outlet over the tentative deal by Hutchison, which is controlled by Li’s family.
That raises questions about the deal and highlights the difficulties Hong Kong businesses face as they balance demands from Beijing for national loyalty and their own capitalist interests in the once free-wheeling Asian financial hub. Here’s what to know about the issue.
Read: Li Ka-shing: Hong Kong's richest man in hot water over Panama Canal deal (AP)
Related:
III. China Development Forum
Dozens of foreign CEOs will visit Beijing this month for a flagship development conference where some are expected to meet President Xi Jinping, according to a draft agenda and three sources familiar with the matter.
The annual China Development Forum will take place on March 23-24 at the Diaoyutai State Guesthouse in the capital, two sources told Reuters.
Beijing is keen to attract foreign investment at a time of heightened geopolitical tensions, as policymakers try to boost domestic consumption to offset fresh U.S. tariff pressure.
Those attending include the CEOs of FedEx, Siemens, automakers BMW and Mercedes-Benz, chip designer Qualcomm, AstraZeneca, Nestle, Saudi Aramco, Citadel, Rio Tinto, Estee Lauder, Standard Chartered and KPMG, according to a draft agenda seen by Reuters. The chairman of Deutsche Bank is also on the list.
[…]
Chinese Premier Li Qiang is not likely to meet with foreign CEOs this year, the source added, after he skipped a customary meeting last year - one of the rare opportunities for foreign executives to have face time with a top Chinese official.
"I think it's still important for the Chinese to showcase their interest in foreign businesspeople but it's hard to see how there is a real dialogue going on," Joerg Wuttke, partner at DGA Group and former president of the European Chamber of Commerce in China, told reporters in Shanghai on Monday.
"It would be nice if (Xi) has a new message of real openness and the question is would he do this. In the European business community we've coined this phrase 'promise fatigue'."
Read: Foreign CEOs to flock to China for key summit, Xi meeting, sources say (Reuters)
Related: China to hold back-to-back forums, showcasing commitment to high-level opening-up (Global Times)
Keep reading with a 7-day free trial
Subscribe to What's Happening in China to keep reading this post and get 7 days of free access to the full post archives.