The Chinese government and the Communist Party jointly issued a long list of initiatives planned on Sunday, encouraging people to spend more.
Their roadmap for economic stimulation included greater pensions, better medical benefits and higher wages. This is a measure that can slow China's domestic consumption. But many of these tasks have been allocated to the country's local governments, many of which struggle under the enormous debt and plunging revenues due to a decline in the sale of state land.
The action comes as Chinese leaders are looking for ways to ease the economy from reliance on increasing trade surplus, which reached around $1 trillion last year. President Trump has already imposed a 20% tariff on Chinese freight on the US. Countries in Europe, Latin America, Africa and the Middle East are also increasing tariffs on China's vastly manufactured, produced exports.
Some of the documents released on Sunday appeared to be aimed at reassuring the Chinese people that their investments were safe. Authorities have pledged to “take multiple measures to stabilize the stock market” to support the real estate market, which is being undermined by falling real estate prices.
The housing market crash over the past three years has wiped out much of the savings of the middle class of China. Chinese households responded by reducing their spending on hotels, restaurants and other services, entering their savings in their bank accounts despite little interest.
Data released by China's National Bureau of Statistics on Monday confirmed this trend, indicating that consumer spending remains weak during production, where mostly produced for exports to foreign markets. Retail sales rose 4% in January and February compared to the same months last year. This is in line with what economists expected, but industrial output increased by 5.9%, stronger than expected.
Construction has remained China's biggest weakness for the first two months of the year. The building began in January and February with 29.6% fewer apartments and other homes compared to the previous year.
One of the bright spots for China these days is the stock market. In the US, tariffs and uncertainty caused by Trump's policies dragged the S&P 500 into an amendment last week, dropping more than 10% from its peak. However, China's market has been growing so far this year, partly due in part to the country's enthusiasm for progress in developing its own artificial intelligence programmes.
The Hong Kong stock market, where many Chinese companies trade, has grown by around 20% since Trump took office. Stock prices continued to rise in Hong Kong on Monday, but little has changed in Shanghai and Shenzhen.
The “Special Action Plan for Increased Consumption” was published in the names of two organs of China's highest power: the general office of the Cabinet and the general office of the Communist Party's Central Committee. The extraordinary steps showed that Beijing leaders wanted them to show that they were serious about addressing the shortage of domestic spending.
The senior official will talk about initiatives to increase consumption at a press conference in Beijing on Monday afternoon.
The plan includes many details that can prove popular with the Chinese public when implemented. Local governments are calling for payments to be issued, increased subsidies to “people in need” and increased pension benefits for retirees. He also instructed local governments to pay the companies their late debts.
However, the summary released on Sunday did not include any new promises from the central government to help local government pay for all this.
The Chinese local government, responsible for almost all social spending, raised most of its money three years ago by selling state land to private sector developers. However, these sales collapsed due to the housing market crash.
