China's faltering growth revives cash vouchers talk
Repeats for Asia morning readership. No change to text.
China's economy loses momentum in July after poor Q2
Economists expect officials to fight hard to reach growth target
Wider budget gap, more debt issuance possible later this year
Talk of consumption vouchers re-emerges in state media
By Kevin Yao and Ellen Zhang
BEIJING, Aug 16 (Reuters) -Another round of bad Chinese economic figures is raising pressure on Beijing to loosen the fiscal spigot further and even dole out shopping vouchers to get growth back towards this year's target of roughly 5%.
After a dismal second quarter, the world's second-largest economy lost momentum further in July: new home prices fell at the fastest pace in nine years, industrial output slowed, export and investment growth dipped and unemployment rose.
Other data beat forecasts, but not for positive reasons. Rising inflation was attributed to bad weather rather than stronger domestic demand, a jump in imports reflected frontloaded chip purchases before expected U.S. technology curbs, and a pickup in retail sales was flattered by low comparisons in 2023.
In all, the data paints a worrying picture for policymakers, who look increasingly likely to ramp up stimulus unless they accept slower growth and the prospect of a downward spiral in consumer and business confidence.
"The current economic performance remains behind target, necessitating immediate and significant policy intervention," said Carlos Casanova, Asia senior economist at UBP. This might require the government to widen the budget deficit to 4% of gross domestic product (GDP) from the planned 3%, he said.
One policy adviser, speaking on condition of anonymity, said Beijing may decide in October to bring forward part of next year's bond issuance quota if growth did not show signs of bottoming out in the summer.
"Otherwise, the economy will look ugly, and 5% would be out of the question," the adviser said, without detailing where that stimulus would go.
China made similar moves last October, when it raised the deficit to 3.8% of GDP from 3.0% and separately frontloaded part of the 2024 local government debt quotas to invest in flood-prevention and other infrastructure.
What might change from last year is how the extra money would be spent.
The usual playbook of infrastructure spending is bringing dwindling returns after decades of investment in bridges, roads and rail. Meanwhile, China's preferred driver of growth, advanced manufacturing, is fanning trade tensions and concerns over industrial overcapacity and factory gate deflation.
"The Chinese economy, given its size, cannot run on manufacturing and exports alone," Societe Generale analysts wrote in a note on the latest data.
"To hit the 5% growth target - if that's still the target - policymakers need to step up support for domestic demand."
VOUCHER TALK RESURFACES
As consumers tighten their wallets, Chinese e-commerce giants have had to resort to heavy discounting and promotions to attract shoppers, squeezing margins across the retail sector.
Alibaba Group Holding 9988.HK missed market expectations for revenue on Thursday, as the company's domestic e-commerce sales came under pressure from cautious spending.
A top-level policy meeting in July pledged an incremental tilt towards consumer stimulus, in what analysts saw as an official admission the previous toolkit wasn't working as intended.
An article in state media this week revived an idea implemented in the United States and elsewhere during the pandemic but resisted in Beijing.
China Daily, citing three economists from government-backed think tanks, said the government "should consider additional direct support to consumers worth at least 1 trillion yuan ($139 billion) — either cash or vouchers."
That sum is equivalent to 0.8% of last year's GDP.
Such a step "would necessitate expanding this year's deficit ratio or approving additional special treasury bonds," the article said. Li Daokui, director of Tsinghua University's Academic Center for Chinese Economic Practice and Thinking, was quoted as saying "it was advisable" that the consumption coupons be issued during the week-long National Day break in October.
Most economists are sceptical that Beijing will implement such a move, given past resistance. During the pandemic officials preferred to support businesses and left consumers to fend for themselves.
Xing Zhaopeng, senior China strategist at ANZ, said the impact of such vouchers would be a one-off and that consumption would only pick up sustainably when the crisis-hit property market and stocks start recovering.
He estimated households' property wealth has fallen by 20%-30% from a 600 trillion yuan peak - a drop roughly equivalent to China's annual economic output.
"People will spend during the month they get the vouchers," Xing said. "Only property and stock prices will put consumption in perpetual motion."
Writing by Marius Zaharia; Editing by Sam Holmes
면책조항: XM Group 회사는 체결 전용 서비스와 온라인 거래 플랫폼에 대한 접근을 제공하여, 개인이 웹사이트에서 또는 웹사이트를 통해 이용 가능한 콘텐츠를 보거나 사용할 수 있도록 허용합니다. 이에 대해 변경하거나 확장할 의도는 없습니다. 이러한 접근 및 사용에는 다음 사항이 항상 적용됩니다: (i) 이용 약관, (ii) 위험 경고, (iii) 완전 면책조항. 따라서, 이러한 콘텐츠는 일반적인 정보에 불과합니다. 특히, 온라인 거래 플랫폼의 콘텐츠는 금융 시장에서의 거래에 대한 권유나 제안이 아닙니다. 금융 시장에서의 거래는 자본에 상당한 위험을 수반합니다.
온라인 거래 플랫폼에 공개된 모든 자료는 교육/정보 목적으로만 제공되며, 금융, 투자세 또는 거래 조언 및 권고, 거래 가격 기록, 금융 상품 또는 원치 않는 금융 프로모션의 거래 제안 또는 권유를 포함하지 않으며, 포함해서도 안됩니다.
이 웹사이트에 포함된 모든 의견, 뉴스, 리서치, 분석, 가격, 기타 정보 또는 제3자 사이트에 대한 링크와 같이 XM이 준비하는 콘텐츠 뿐만 아니라, 제3자 콘텐츠는 일반 시장 논평으로서 "현재" 기준으로 제공되며, 투자 조언으로 여겨지지 않습니다. 모든 콘텐츠가 투자 리서치로 해석되는 경우, 투자 리서치의 독립성을 촉진하기 위해 고안된 법적 요건에 따라 콘텐츠가 의도되지 않았으며, 준비되지 않았다는 점을 인지하고 동의해야 합니다. 따라서, 관련 법률 및 규정에 따른 마케팅 커뮤니케이션이라고 간주됩니다. 여기에서 접근할 수 있는 앞서 언급한 정보에 대한 비독립 투자 리서치 및 위험 경고 알림을 읽고, 이해하시기 바랍니다.