China's Consumer Sentiment Hits Record Low...Will Direct Cash Support Gain Momentum?

[Image source=EPA Yonhap News]

[Asia Economy Reporter Kim Hyunjung] Consumer sentiment in China, where a strict zero-COVID policy had been maintained for a long time, has shrunk to an all-time low. There is a growing call for the government to provide direct cash support for a rapid economic recovery.

On the 2nd, Hong Kong's South China Morning Post (SCMP), citing the announcement from China's National Bureau of Statistics, reported that the consumer confidence index in April plunged sharply to 86.7 compared to 113.2 in the previous month. This is the lowest figure since related data began to be compiled and announced in 1991, and the drop from March to April (26.5) is also the steepest ever. When the consumer confidence index falls below 100, it means that pessimistic views about the economy are more dominant.

Earlier, Premier Li Keqiang of the State Council expressed a negative stance on the government's direct support for economic recovery, citing fiscal burdens and regional development imbalances.

Yao Yang, dean of the National School of Development at Peking University, recently said at a forum, "If cash is distributed, people will immediately gain confidence in consumption," adding, "Trust in the economy will improve, and consumption and demand will increase." He emphasized that authorities should approve local governments to issue bonds and decide on the payment scale. He also added, "The appropriate time to introduce consumption stimulus policies is when the epidemic gradually and clearly weakens."

China's retail sales in April decreased by 11.1% year-on-year, marking the lowest point since March 2020 (15.8%). Although consumption stimulus policies were mentioned in the 33 support plans recently announced by the State Council, the focus was on the supply side.

There are also voices opposing direct cash support. Liu Yuanchun, the new president of Shanghai University of Finance and Economics, said that if the size of subsidies varies by region or industry, fairness issues could become a bigger problem than consumption issues. President Liu proposed an alternative to induce consumption through the issuance of consumption vouchers.

This content was produced with the assistance of AI translation services.