Consumer Stimulus in 2021: Policy Options and Limitations

Consumer-focused stimulus has been the obvious missing link in China’s efforts to combat the economic effects of the COVID-19 outbreak, which now include deflation in consumer prices. Recent Politburo statements suggest policy-makers will focus on boosting household consumption in 2021. However, the policy options available to Beijing are still limited, including subsidy programs for major purchases or consumption coupons, distributed via digital wallets or digital currency. Ultimately, China’s soft recovery in consumer spending is linked to income and employment growth, which were both slowing even before the virus outbreak. Marketizing rural land, the fastest option to boost rural incomes significantly, has been implemented very slowly since the Third Plenum reform pledges in 2013.

Posted December 18, 2020
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