Analysis: What Are the Key Factors to Spur China’s Consumption?
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Fiscal subsidies will give Chinese consumer confidence a much-needed shot in the arm, but long-term spending growth hinges on improvements in household income and the stock and property markets.
The consensus among analysts is that China needs to boost domestic consumption as mounting uncertainties surrounding the global trade environment weigh on the country’s exports — a key economic driver for the world’s second-largest economy.
China has been grappling with tepid domestic consumption since the pandemic. As part of its efforts to encourage spending, the government in March 2024 launched a trade-in program for consumer goods such as cars and home appliances, while also undertaking large-scale equipment upgrades. The government in July earmarked some 300 billion yuan ($41.1 billion) in subsidies for both programs.
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- China is implementing fiscal subsidies and trade-in programs to boost consumer confidence and domestic consumption, with 300 billion yuan allocated for these efforts.
- Despite recent growth in consumption expenditure, long-term improvements rely on asset-based income growth, a stable stock and property market, and enhanced social welfare programs.
- Analysts suggest expanding subsidies to services like tourism and dining to sustain consumption momentum, with local governments aiming high on household disposable income growth as part of broader economic strategies.
- Shenwan Hongyuan Securities Co. Ltd.
- Shenwan Hongyuan Securities Co. Ltd. analysts suggest that long-term consumption improvement in China requires increases in asset-based net income and transfer income, such as social welfare payments. They emphasize that the stability of the stock and property markets, along with the direction of fiscal stimulus, will significantly influence the consumption trajectory.
- Huatai Securities Co. Ltd.
- Huatai Securities Co. Ltd. analysts emphasize the need for coordinated efforts in asset prices, employment, income expectations, and the social security system to motivate consumption in China.
- March 2024：
- Chinese government launched a trade-in program for consumer goods and large-scale equipment upgrades.
- July 2024：
- Chinese government earmarked around 300 billion yuan ($41.1 billion) in subsidies for trade-in programs and equipment upgrades.
- December 2024：
- Central Economic Work Conference took place, where top policymakers agreed on increasing pension payouts and raising the subsidy standard for household health insurance.
- Late last year (2024)：
- Fiscal measures started taking effect, with per capita consumption expenditure growing 4.5% year-on-year in the fourth quarter.
- Early last month (January 2025)：
- China expanded the range of products eligible for subsidies under the trade-in program.
- January 2025：
- Shenwan Hongyuan Securities Co. Ltd. reported on the need for increases in asset-based net income and social welfare payments to improve consumption.
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