Restoring consumer sentiment and revitalizing confidence among consumers will be among the key priorities for China's economic growth for the rest of this year, as policymakers shift their focus more toward seeking a consumer-led recovery, according to experts.

As the broader economy continues to face mounting external uncertainties and still-weak domestic demand, they said the country needs to step up stimulus measures to promote a recovery in consumer spending. Potential measures include offering direct support to households and improving the supply-side offerings of products and services.

Their comments came as China reported major economic data on Thursday that pointed to faster growth on the consumer side while both industrial production and investment grew at a slower pace in July.

Figures released by the National Bureau of Statistics showed that China's retail sales, a key measurement of consumer spending, grew 2.7 percent year-on-year in July, up from the 2 percent growth in June.

The country's value-added industrial output grew 5.1 percent in July from a year earlier, while fixed-asset investment rose 3.6 percent in the January-July period compared with the same period last year.

Wang Qing, chief macroeconomic analyst at Golden Credit Rating International, said the latest indicators suggest an uneven recovery, with the supply side being stronger than the demand side, pointing to the still-weak endogenous driving force and lackluster demand.

"Although the economy still faces several headwinds, China's economic recovery will likely gain a firmer footing in August with a new round of stimulus measures aimed at stabilizing growth taking effect gradually," Wang said.

In a bid to further boost domestic demand, China recently announced that it would allocate about 150 billion yuan ($20.96 billion) in ultra-long-term special treasury bonds to support trade-in deals for consumer goods, such as appliances and autos, which is seen by some analysts as a sign that the central government has become more willing to directly subsidize consumers.

Chang Haizhong, executive director of corporates at Fitch Bohua, said: "It is expected to ultimately promote an increment of more than 600 billion yuan in consumption, effectively driving the growth of total retail sales in the second half of the year."

Chang also expects that the People's Bank of China, the nation's central bank, will cut interest rates and the reserve requirement ratio at least once each in the second half of the year. "It is not ruled out yet that interest rates on existing housing loans will be lowered again, reducing the overall financing costs of society and stimulating consumption."

A recent meeting of the Political Bureau of the Communist Party of China Central Committee pledged to step up macroeconomic support in the second half of the year, with a greater focus on expanding domestic demand by stimulating consumption.

Zhang Yansheng, former secretary-general of the Academic Committee of the National Development and Reform Commission, said cash handouts would be an immediate and effective way to boost spending.

"It is advisable for the government to announce cash handouts for people," he said, adding that such a measure could "strongly boost confidence among consumers and revitalize people's expectations".

"That will significantly bolster household consumption and support economic growth."

Looking toward the rest of the year, Zhou Maohua, a researcher at China Everbright Bank, said China's domestic demand will likely pick up in the second half of the year, with the accelerated use of special treasury bonds and local government special bond funds, as well as policies that aim to stabilize the property market gradually taking effect and the shopping sprees that are expected during the holidays.

Related

Go to Forum >>0 Comment(s)