LOOSENING THE PURSE STRINGS

By Wang Jun

The National Development and Reform Commission （NDRC）， along with 22 other central ministries and commissions， issued a guideline to promote domestic consumption in mid-March. Following the guideline， several local governments at various levels， from the district to the provincial， have issued their own instructions to bolster spending and consumption.

“The pandemic has brought some impact on consumption， so expanding residents consumption， promoting consumption recovery and unleashing consumption potential are the key measures to offset the impact and stimulate the economy，” Ha Zengyou， Director of the Department of Employment and Income Distribution of the NDRC， said at a press conference of the Joint Prevention and Control Mechanism of the State Council， Chinas cabinet， in Beijing on March 18.

“Particularly under the new circumstance of the infections accelerating throughout the world， it is necessary to concentrate on expanding domestic consumption and fostering a strong domestic market，” Ha said.

Multiple stimulus policies

“The outbreak of the novel coronavirus disease（COVID-19） has seriously affected the consumption market， because people are going out less，”Wang Bin， Deputy Director of the Department of Market Operation and Consumption Promotion of the Ministry of Commerce （MOFCOM）， said at a press conference on March 16.

From January to February， retail sales of consumer goods in China dropped by 20.5 per- cent year on year， according to figures from the National Bureau of Statistics （NBS）. The sales value of automobiles went down by 37 percent， furniture 33.5 percent， construction materials 30.5 percent and home appliances 30 percent year on year.

A report released by Zhongtai Securities， a securities company based in Jinan， Shandong Province in east China， said the travel industry was the most affected， suffering a revenue decline of 1.2 trillion yuan （$169.01 billion） in the first quarter， nearly 20 percent of its revenue in a year. Retail sales of the catering， transport and film industries also dropped by 960 billion yuan（$135.21 billion）， 140 billion yuan （$19.72 billion） and 10 billion yuan （$1.41 billion）， respectively.

“Of the 4.7-trillion-yuan （$661.97 billion） total revenue earned by the catering industry in 2019， 15.5 percent came from the Spring Festival holiday. The losses of the industry are difficult to recover fully，” the report said.

But after COVID-19 is contained in China， the catering industry will be the first to resume growth. According to a survey by Penguin Intelligence， Internet giant Tencents Internet industry research arm， 65.9 percent of the netizens surveyed said they would eat out once the situation normalizes. It said the catering industry is expected to see remarkable rebound. Spending on shopping， beauty products and the cinema would also increase.

With the situation significantly improved in China， industries have resumed work and market sales started to recover. “More than 90 percent of the countrys large wholesale markets of farm produce， big supermarkets， chain stores， e-commerce firms and express delivery services have reopened，” Wang said.

Besides encouraging officials to take the lead in eating out， some local governments have decided to give out consumption vouchers. According to Ha， Nanjing， Jinan and Ningbo are among the cities that have done so.

“The NDRC supports local governments to adopt any pragmatic and effective measures taking into consideration their own conditions，”Ha said， suggesting that local governments should take into account local fiscal capability and ensure consumers and market players really benefit from these policies.

The multiple supporting policies issued by both the central and local governments concerning the catering industry， such as reducing or exempting some taxes or fees， are practical and effective， Chu Xueyou， Vice President of the Xibei Group， a Chinese restaurant chain specializing in northwest China cuisine， said， adding they would help businesses to reduce costs.

“Encouraging government officials to take the lead in eating out also indicates the governments attitude to stimulating consumption，”Chu told 21st Century Business Herald.

Confidence recovery

According to figures from the Ministry of Human Resources and Social Security， private enterprises as well as micro， small and mediumsized enterprises account for more than 90 percent of the total number of enterprises in the country. They contribute more than 50 percent to the tax revenues， 60 percent to the GDP and 70 percent to technology innovation achievements and create more than 80 percent of urban jobs.

However， restricted by their size and technology capability， most of them are in the downstream of the industrial chains in manufacturing and services， and so are particularly affected by COVID-19.

Will the huge urban labor population， most of whom work for these enterprises， be capable of resuming enough spending capability and confidence？

According to a report issued in February by the Chinese Academy of Financial Inclusion on the impact on the financial health of weak economic entities， among the wage earners， 47 percent have sufficient cash flows for maximum three months of living expenses， and 45 percent have enough for more than six months.

However， 30 percent of them believe they can maintain their current standard of living， and another 30 percent think their standard of living may decline but they will not become unemployed.

The pandemic will enhance consumersawareness of risk resistance and the impor- tance of cash flows， making them more rational in consumption. According to a report on public confidence in consumption during the critical period issued by Rong360.com， a provider of financial advisory services， more than 60 percent of those surveyed said they would be more rational in spending， and only 11 percent said they would expand consumption.

“COVID-19 has a relatively large impact on consumption in the short term， but the influence in the medium term will become moderate，” Wang said， adding that as the series of policies by the central and local governments are carried out， the consumption market will recover.

“The epidemic has subjected Chinas consumption and market circulation to a severe test， but it will not change the trend of long-term stability and continuous upgrading in Chinas consumption market，” Wang said.