Yu Yongding Says Consumption Vouchers of Limited Effect, Infrastructure Investment a Better Growth Tool

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A leading Chinese economist says efforts by the government to use consumption vouchers to spur consumer spending are unlikely to prove highly effective, instead calling for greater use of infrastructure investment to drive growth.

“The issuance of consumption vouchers can spur consumption, but its effects will be limited and the difficulty of operation is large,” said Yu Yongding (余永定), an advisor to the China Finance 40 Forum, in an interview with Ruijian Economy.

“What’s more important is that consumption is mainly impacted by income and income expectations – if future income expectations are poor, consumers will likely convert their remaining money into savings deposits (after using vouchers), and not use them to further increase consumption.”

Yu instead points to infrastructure spending as the best tool for the Chinese government to make adjustments to economic growth.

“Under current conditions, the only macro-economic variable that the government can best influence, or even directly control, is infrastructure spending,” said Yu.

“The government can use acceleration in infrastructure investment to affect the pace of fixed asset investment, or capital formation, and thus further influence GDP growth and achieve stable growth.”

Yu’s remarks come after the widespread use of consumption vouchers by local Chinese governments during the COVID-19 pandemic, as a means of shoring up economic growth.