China announced a “Special Action Plan to Boost Consumption” on Sunday. The plan aims to prop up domestic consumption in the world’s second-largest economy. The wide-ranging plan includes measures to stabilize the stock market.
China's new #consumption policy, for the first time, highlights the need to stabilize the stock and real estate markets. Unlike past supply-side approaches, it now prioritizes #demand—boosting household incomes and easing financial burdens.https://t.co/Vjj2oceOS4
— China SCIO (@chinascio) March 18, 2025
It also includes developing more bond products suitable for individual investors. China is currently grappling with a sluggish consumer landscape. The most recent Consumer Price Index (CPI) in February recorded its steepest fall in over a year.
Will be important to watch where resources come from to support domestic consumption. Local governments already are strapped for cash and no longer have option of selling property to developers to raise revenue. https://t.co/hUr37yq2Zt
— Ryan Hass (@ryanl_hass) March 16, 2025
The Producer Price Index (PPI) has been in negative growth territory since September 2022.
This appears to be a very big deal and policy change if China is actually moving to boost its consumer and demand. https://t.co/Lvn0HxwlMM
— Sara Eisen (@SaraEisen) March 17, 2025
The General Office of the Central Committee stated the plan aims to “vigorously boost consumption, expand domestic demand, and enhance consumption capacity by increasing income and reducing burdens.”
China’s CSI 300 index and Hong Kong’s markets were slightly up on Monday, registering gains of about 0.1%, following the announcement. This announcement comes a week after China’s Premier Li Qiang delivered an annual government work report.
The report named boosting consumption as the top task for the year. The plan also calls for support for inbound and domestic tourism.
China aims to increase domestic demand
Efforts are planned to develop ice and snow regions into globally recognized winter tourism destinations. Visa-free arrangements will be expanded, and regional entry policies optimized. Lynn Song, ING’s chief economist for Greater China, mentioned that while the plan does not contain “anything too new, setting this out as an action plan signals that concrete steps at local levels will follow.”
Song emphasized that the plan shows a commitment to addressing long-term structural issues.
These issues include wage slowdown, the negative wealth effect from the property and stock markets, and the insufficient social safety net. The plan proposes actions to increase incomes for both urban and rural residents, including farmers. Strategies include employment support plans and continued implementation of the unemployment insurance policy.
“These are likely multi-year directions rather than something that can be fixed in a few months,” Song noted. She highlighted the importance of this move for a long-term transition to a consumption-driven economy. In January, Chinese leaders pledged an additional 300 billion yuan (41.45 billion USD) of ultra-long special treasury bonds for consumer subsidy support.
Richard Harris, chief executive at Port Shelter Investment Management, emphasized the focus on the domestic economy. “The authorities are determined to stimulate the economy and keep it going. Even if we see issues with the export side of the economy, they are determined to get the domestic economy going because they have to,” Harris noted.
