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Opinion
More of China’s spending power needs to be unleashed. Here’s how
Childcare, healthcare and elderly care are precisely the parts of China’s consumer demand that remain significantly untapped
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Zhang Jun is dean of the School of Economics at Fudan University and director of the China Centre for Economic Studies, a Shanghai-based think tank.
There are signs that the Chinese economy has been improving, owing to the government’s September 2024 stimulus package. Year-on-year gross domestic product growth in the first quarter of this year reached 5.4 per cent – continuing the marked acceleration from last year.
In fact, the change in policy direction has been evident since late 2022, when Chinese policymakers acknowledged that falling demand was becoming a major problem. The most important cause was the real estate market, where a collapsing price bubble hit local government revenues hard, cutting into residents’ property and business income – an important part of disposable income – and pushing consumer spending below trend.
To alleviate the pressure on local governments, the central government allowed them to expand their debt financing by issuing US$1.4 trillion worth of long-term bonds – over five years – to replace their short-term debt. Proceeds from long-term bond issuances were also used to shore up state-owned commercial banks’ balance sheets and enhance their capacity to generate credit.
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