China looks to the little guy for spending boost
The author is a Reuters Breakingviews columnist. The opinions expressed are his own. Updates to add chart.
By Chan Ka Sing
HONG KONG, July 31 (Reuters Breakingviews) -According to Mao Zedong, the Chinese Communist Party’s real strength comes from the masses. The People’s Republic is now turning to its humble grassroots to boost consumption. Yet these policies will unlikely deliver the immediate growth policymakers and investors are looking for.
Beijing again signalled a sense of urgency to revive the $17 trillion economy on Tuesday, when the Politburo, a top decision-making body, convened to set out priorities for the second half of the year to meet its roughly 5% GDP growth target for 2024. Notably, it called for policies that would increase wagesand enhance the "capacity and willingness" of low- and middle-income groups to spend, according to a meeting summary reported by official news agency Xinhua. The Chinese middle class, estimates a separate state-owned newspaper, surpassed 500 million people this year.
Details are lacking, but the overall message is sensible. One way to cajole savers to spend more would be to raise the minimum wage, which ranges from as low as 1,650 yuan ($228) in Lhasa to 2,690 yuan in Shanghai. At the same time, officials during the recent Third Plenum meeting have hinted at higher taxes for the wealthy, including on a broader range of luxury items. Combined, those policies could encourage domestic spending while giving cash-strapped local governments more stable sources of revenue.
The catch is that these reforms will take time. Beijing is embarking on an ambitious economic transition away from its investment-led growth model. That would require the government to allocate more resources from the state to households. Instead of pouring money into mega infrastructure projects, for instance, the government may spend more on elderly and child care, pensions and affordable housing.
Still, the most pressing concern in the world's second largest economy is the current slump. Second-quarter growth slowed to a worse-than-expected 4.7% while retail sales and imports underperformed industrial output and exports. To this end, the central government will have to keep doing the fiscal heavy-lifting. It will probably have to offer more financial support to local governments to fund affordable housing projects, for starters.Beijing will have to open up its wallet until the masses do.
CONTEXT NEWS
The Political Bureau of the Communist Party of China held a meeting on July 30 to analyse the current economic situation and set out priorities for the second half of 2024, Xinhua news agency reported.
The 25-member, top decision-making body has called for policies to promote consumption, increase residents’ income “through multiple channels”, and enhance the “capacity and willingness” of low- and middle-income groups to spend.
Graphic: China's economic growth is slowing China's economic growth is slowing https://reut.rs/3SbsgAD
Editing by Robyn Mak and Ujjaini Dutta
Últimas noticias
Descargo de responsabilidades: Cada una de las entidades de XM Group proporciona un servicio de solo ejecución y acceso a nuestra plataforma de trading online, permitiendo a una persona ver o usar el contenido disponible en o a través del sitio web, sin intención de cambiarlo ni ampliarlo. Dicho acceso y uso están sujetos en todo momento a: (i) Términos y Condiciones; (ii) Advertencias de riesgo; y (iii) Descargo completo de responsabilidades. Por lo tanto, dicho contenido se proporciona exclusivamente como información general. En particular, por favor tenga en cuenta que, los contenidos de nuestra plataforma de trading online no son ni solicitud ni una oferta para entrar a realizar transacciones en los mercados financieros. Operar en cualquier mercado financiero implica un nivel de riesgo significativo para su capital.
Todo el material publicado en nuestra plataforma de trading online tiene únicamente fines educativos/informativos y no contiene –y no debe considerarse que contenga– asesoramiento ni recomendaciones financieras, tributarias o de inversión, ni un registro de nuestros precios de trading, ni una oferta ni solicitud de transacción con instrumentos financieros ni promociones financieras no solicitadas.
Cualquier contenido de terceros, así como el contenido preparado por XM, como por ejemplo opiniones, noticias, investigaciones, análisis, precios, otras informaciones o enlaces a sitios de terceros que figuran en este sitio web se proporcionan “tal cual”, como comentarios generales del mercado y no constituyen un asesoramiento en materia de inversión. En la medida en que cualquier contenido se interprete como investigación de inversión, usted debe tener en cuenta y aceptar que dicho contenido no fue concebido ni elaborado de acuerdo con los requisitos legales diseñados para promover la independencia en materia de investigación de inversiones y, por tanto, se considera como una comunicación comercial en virtud de las leyes y regulaciones pertinentes. Por favor, asegúrese de haber leído y comprendido nuestro Aviso sobre investigación de inversión no independiente y advertencia de riesgo en relación con la información anterior, al que se puede acceder aquí.
