Beijing issues action plan to support household consumption
We're excited.
Well, moderately excited.
The reason: Beijing just dropped a new income and consumption support package.
On Sunday, the general offices of the Party Central Committee and the State Council issued an action plan to boost consumption, expanding on measures outlined in the 2025 Government Work Report (GWR).
The plan aims to boost household income by – circuitously – boosting business income, including by:
- Promoting employment in key sectors, government, and the private sector to drive wage growth
- Accelerating repayment of state arrears to small- and medium sized enterprises
Other income-boosting measures include:
- Raising minimum wages
- Increasing farmers' earnings from land appreciation and rural housing rentals
- Expanding property income channels
- Encouraging institutional investments to stabilize stock markets
The plan also reiterates the GWR’s commitment to improve public services, including by expanding education resources for children of migrant workers.
The plan should also stimulate housing sales by:
- Allowing more flexible use of the government-administrated housing provident fund (HPF), an employer/employee-funded social insurance pool designed to help homebuyers save for homes
- Lowering HPF mortgage rates
Get smart: Increasing minimum wages, inflating equity prices, and expanding rural incomes will all have a positive spillover effect on consumption, especially for lower-income households who have a higher propensity to consume.
Get smarter: However, channeling household income support through businesses is a tried, tested, and largely unsuccessful policy.
- With unemployment at a two-year high, and youth unemployment at a striking 16.1%, it's codswallop to think that promoting employment will drive wage growth.
- Meanwhile tweaks to the HPF may support property sales at the margins, but will do little to reverse the sector's downturn.