China: Economists advise the government to distribute money to the public, in the form of shopping vouchers
According to Chinese economists, the central government in Beijing should issue purchase vouchers for consumer goods to ease financial pressure on local authorities and revive demand in the slowing economy.
Beijing's zero-Covid policy has hit consumption in the world's second largest economy and the finances of local governments have been strained by the costs of maintaining controls and have no resources to revive the economy, all in an economy that no longer grows as before, or does not grow at all. This money redistribution idea was then picked up by the big media SCMP , who reported it in an online article.
The solution found by a group of economists is nothing more than an oriental version of the so-called "Helicopter money", through the issue of consumer vouchers with a cash equivalent to be given directly to citizens to support their spending: " It is now an immediate priority to lift the demand-side economy ,” Mao Zhenhua, director of the Economic Research Institute of Renmin University of China, said at last week's China Macroeconomic Forum.
Mao said the main shortcoming of the Chinese economy is a serious lack of consumption, which has been limited by the uncertainties induced by the central government's zero Covid policy. Consumers are less optimistic about the future and, as a result, are more inclined to save rather than spend, but this depresses the economy while also cutting tax revenues for local governments that can no longer support the economy. This is evident if we analyze the trend of monthly consumption:
If we then analyze consumption on an annual basis, we see a long-term trend towards a reduction in their growth
To counter this trend, according to economists, Beijing should issue consumer vouchers of 5,000 yuan (700 dollars, 680 euros) for each resident, including minors, in the form of electronic money, supplementing the traditional discount vouchers of the shops on the eve of the period holiday and the "Singlemen's Day", a great Chinese consumer celebration.
“Central fiscal expenditures are important because local finances are all in a difficult situation right now, and even though there are some local governments that have a fiscal surplus, I don't think they are that generous,” according to economist Mao who believes how this expenditure would not be too high and would be lower than the aid granted by other states.
Shen Jianguang, chief economist at Jingdong Technology Group, said issuing consumer coupons would have an immediate impact on the recovery. "Only the central government has the fiscal space to issue at least 5,000 yuan for the entire population."
Shen said the consumer vouchers would have a very significant supply-side effect, allowing self-employed workers and businesses affected by the pandemic to resume operations, easing layoffs and further boosting tax revenues for local governments.
In communist China, therefore, economists recommend giving a strong boost to consumption, especially the luxury ones associated with the holiday season. It seems a bit like the exact opposite of what is happening in the West where, between rising interest rates and fiscal austerity, everything is being done to contain household consumption. Who knows which of the two policies will be more successful.
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The article China: economists advise the government to distribute money to the public, in the form of shopping vouchers comes from Scenari Economici .
This is a machine translation of a post published on Scenari Economici at the URL https://scenarieconomici.it/cina-gli-economisti-consigliano-al-governo-di-distribuire-denaro-al-pubblico-sotto-forma-di-buoni-acquisto/ on Tue, 22 Nov 2022 10:00:44 +0000.