The Chinese government is now consumed with consumption
The Chinese government is now consumed with consumption
Banks further cut deposit rates to prop up margins. Carbon emissions included in development plans.
Our briefing on critical economic and financial developments in China as of Tuesday, 6 August, 2024:
State Council declares that new reforms will focus on boosting private enterprise and consumption in China.
The Ministry of Commerce says it will release a package of “comprehensive policies” to boost the consumption of services in China.
Communist Party hails results of China’s first half consumption drive.
Chinese banks accelerate reductions to deposit rates to alleviate the squeeze on net interest margins, following the central bank’s rate cuts.
The State Council includes carbon emissions in economic development plans.
The Chinese central bank convenes its mid-year conference on work in the second half of 2024 - flags focus on boosting consumption.
State Council says new reforms aim to boost private enterprise and consumption
China's highest government authority has flagged its commitment to driving the growth of private enterprise and domestic consumption in its upcoming round of reform measures.
At a press conference held on 1 August, the State Council said that these measures would include:
The drafting of a new law to expedite the development of the private economy.
Improvements to systems and mechanisms for private enterprise to participate in key national strategies.
Driving the release of opinions on improvements to the market entry system.
The release of new market entry negative lists.
A focus on accelerating the establishment of a unified grand national market.
The State Council also said that it had "placed consumption in an even more prominent place," and would seek to expedite the consumption of consumer durables including automobiles and household appliances.
In order to support the development of high-quality Chinese enterprises, Beijing will permit certain firms to engage in overseas borrowing based on their individual development needs.
Ministry of Commerce announces policy package to drive Chinese services consumption
On 2 August, Xu Xingfeng (徐兴锋), head of the Market Operations and Consumption Driving Office of the Ministry of Commerce (MOC), said the ministry would continue to "expedite the high-quality development of services consumption and invigorate new drivers of consumption."
"At present, consumers are more and more focused on their own mental happiness and physical well-being...services consumption is the next major area for expanding and upgrading consumption."
Xu said the next step will be for MOC to release a "comprehensive document for expediting the high-quality development of services consumption."
"We will drive the orderly expansion and opening of areas including telecommunications, the Internet, education, culture and healthcare; support consumption in the areas of culture, tourism, aged care and education, and satisfy the services consumption needs of households."
Communist Party hails results of Chinese government's consumption drive
The People's Daily - the flagship newspaper of China's Communist Party - says the latest round of policy measures to drive domestic consumption is proving a success.
An opinion piece published by the People’s Daily pointed in particular to China's "old for new" policy (旧换新政策), designed to encourage Chinese consumers to upgrade vehicles and home appliances with the aid of government subsidies.
In the first half of the year the number of vehicles scrapped for upgrade rose by 27.6% in year-on-year terms, while sales of clean energy vehicles leaped 33.1%.
At a press conference held on 2 August, Li Yongqi (李詠箑) from the Ministry of Commerce (MOC) highlighted the Chinese government's focus on boosting consumption.
"The Ministry of Commerce is striving to strengthen the fundamental role of consumption in economic development," Li said.
"[We] have unveiled old-for-new consumption action plans and a series of policies to spur vehicle consumption, home goods consumption and the high-quality development of the food and beverage sector.
"[We] have successively held a series of activities for China's 'Year of Invigourating Consumption' and 'Year of Spurring Consumption.'"
Chinese banks cut deposit rates up to 70 basis points to alleviate pressure on net interest margins
Financial institutions around China have continued to cut deposit rates since the start of August, in a bid to support profitability following rate cuts from the Chinese central bank.
On 1 August, rural commercial banks and credit societies in the Chinese provinces of Guangxi, Guangdong and Heilongjiang announced reductions to deposit rates of up to 70 basis points.
On the same date, Hunan province lender Bank of Changsha also announced cuts to rates for its fixed-term deposit of between 10 to 20 basis points, following similar cuts from Bank of Xiamen in Fujian province and Bank of Jiangsu.
These reductions arrive after all six of the big state-owned banks announced deposit rate cuts on 25 July, with a further 18 joint-stock commercial banks also rapidly following suit before the end of the month.
Ming Ming (明明), chief economist from China CITIC Securities, said the cuts are intended to relieve the liabilities costs of Chinese banks and ease narrowing interest rate margins, following declines in lending rates driven by the central bank’s cuts in July.
Wen Bin (温彬), chief economist at China Minsheng Bank, said the move could have the effect of exacerbating an exodus from bank deposits towards wealth management products (WMP) that offer higher returns to Chinese investors.
China includes carbon emissions in economic development plans
The State Council recently issued the "Work Plan on Accelerating the Establishment of a Carbon Emissions Dual Control System" (加快构建碳排放双控制度体系工作方案).
The Plan calls for the inclusion of carbon emission indices in China's future economic and social development plans.
It also outlines plans to establish or improve regional carbon assessments, industry-based and enterprise-based carbon control and management, carbon tracking for goods and carbon assessments for projects.
A key part of China's efforts to reduce carbon emissions encompasses market-based measures, including the national greenhouse gas voluntary reduction trading market (全国温室气体自愿减排交易市场), and efforts to improve the green certificate trading market.
China's central bank convenes conference on work in the second half of 2024
The People's Bank of China (PBOC) - being the Chinese central bank - convened a meeting on 1 August to study work arrangements for the second half of 2024, as well as the outcome of the Communist Party's historic Third Plenum meeting held in the second half of July.
With regard to the effective implementation of stable monetary policy, PBOC said it would "shift the focus more towards people's living standards and expediting consumption."
PBOC said it would "expand the intensity of macro-economic adjustments and strengthen counter-cyclical adjustments," with a focus on five key areas including:
Continuing to effectively implement stable monetary policy.
Strengthening the effective performance of the "Five Grand Chapters" (五篇大文章) of coordinated planning and policy implementation.
Continuing to prevent and dissolve financial risk in key areas.
Deepening financial reform and opening and international financial cooperation.
Continuing to raise financial services and management levels.