In a strategic move aimed at invigorating consumer activity, Chinese authorities have mandated financial institutions to support increased consumer lending and credit card usage. This initiative, announced Friday by the nation’s financial oversight body, reflects the Communist Party’s ongoing efforts to bolster consumer confidence. Currently, many consumers are opting to save due to uncertainties around employment and economic projections.
The directive advises banks to extend more credit and devise supportive measures for borrowers who encounter repayment challenges. Following this announcement from the National Financial Regulatory Commission, Chinese stock markets observed a notable uptick. Further details on initiatives to boost both consumption and investment will be shared by officials in a briefing scheduled for Monday. This briefing comes as part of strategies to maintain economic momentum post-COVID-19, a period that saw massive job losses and numerous business closures.
China’s economy, ranking as the second-largest globally, has recently shown a growth rate of approximately 5% as per government statistics. However, concerns regarding employment and soaring costs in healthcare and education discourage consumer spending, affecting a crucial economic driver. Adding to the cautious consumer sentiment is a sustained slump in the real estate market, prompted by governmental efforts to curb real estate developers’ excessive borrowing, which has led to a financial strain on numerous households.
In the previous year, an upsurge in exports provided some relief from the ongoing domestic demand weakness, traditionally driven by consumer spending and investment. Nevertheless, U.S. tariff hikes on Chinese imports, initially ordered by President Donald Trump, could impact exports in the coming period, potentially creating additional challenges for various businesses.
To enhance individual credit consumption, the Chinese government is also financing substantial vehicle and home appliance trade-in schemes. These programs aim to promote energy-efficient products while addressing excess inventory due to tepid demand. Personal borrowing and consumer financing in China have historically been lower than in Western nations, although there has been a noticeable increase recently. Homeownership is widespread, with nearly 90% of Chinese families owning their properties, yet less than half have mortgages.
Moreover, the Chinese population largely prefers cash and digital payment platforms over credit card usage. This trend reflects China’s evolving financial landscape as policymakers strive to strike a balance between fostering economic activity and ensuring financial stability.
