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Chinese consumer spending to get boost

Publication Date : 20-06-2012

 

China will roll out "concrete measures" to stimulate consumption by boosting efficiency and slashing the cost of logistics, said Huang Hai, former assistant minister of commerce.

The moves, to be announced at the national circulation conference in late June or early July that will focus on the movement of goods, are part of efforts to prevent the economy from slowing further amid the deepening crisis in Europe.

The conference aims to address supply chain issues concerning logistics and transportation. Getting goods to the market quicker and cheaper will be a key factor in boosting consumer spending.

"More than 20 ministries and departments, led by the Ministry of Commerce, are ready for the two-day conference, a strategically important conference for the government this year," Huang said.

A draft of a document detailing measures on improving efficiency, reducing logistical costs and increasing consumer spending is awaiting government approval, Huang said.

The conference, originally set for May, was moved back as the government and Premier Wen Jiabao "attach great importance to it and expect to issue substantial policies" during it, said Huang, who helped draft the document.

The draft was finished by a team of officials and experts led by the Ministry of Finance in May and was based on results of a research done by 20 government departments and ministries before Spring Festival.

Zhao Ping, a consumption specialist from the Chinese Academy of International Trade and Economic Cooperation under the Ministry of Commerce, told China Daily that major problems facing logistics include "difficulties in financing and limited networks and infrastructure".

"Relevant policies will probably centre on expanding fiscal expenditure and reducing taxes and fees in different logistical sectors," she said.

"They could include easier access to financing, preferential policies for small and medium-sized enterprises, expanding logistical networks, reducing fees and providing subsidies for expanding storage capacity."

Expenditure on logistics, including transport, storage and management fees, has risen rapidly. Logistical costs, as part of the nation's GDP in 2010, reached 17.8 per cent, according to the National Bureau of Statistics.

That was higher than the 10 per cent average in developed nations.

The cost of moving goods to the market added to domestic consumer prices, and this has dampened consumer confidence.

It is obvious that reducing costs passed on to the consumer will increase consumption, Zhao said. "This is an efficient way to stimulate domestic consumption."

The government recently launched a series of policies to promote consumer spending.

It pledged last month to allocate 26.5 billion yuan ($4.2 billion) to subsidise purchases of energy-saving household appliances and 6 billion yuan ($944.2 million) to boost sales of energy efficient vehicles.

The Ministry of Finance said on June 5 China is offering subsidies up to 400 yuan ($62.9) per unit to buyers of energy-saving water heaters, refrigerators and washing machines.

More measures are under way, and some will be released during the coming conference, Huang said. "It's not a problem of whether to stimulate domestic consumption or not, but a problem of how to do it and in which sectors," he said.

He also told China Daily that purchases of furniture and affordable homes are next on the list.

China has stepped up efforts to build 36 million units of affordable housing by 2015.

The government recently lowered interest rates by 25 basis points. Economists predicted economic growth is expected to accelerate in the third quarter as policy easing takes off.

Huang said that stimulating domestic consumption is a more direct way to boost the economy than a stimulus plan.

Wen said recently that the government will implement fiscal policy to bolster growth, prompting economists to forecast stimulus spending.

 

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