For months, China has promised to help its citizens increase spending to revitalize the economy, yet concrete measures have been limited. On Wednesday, during the National People’s Congress in Beijing, the country’s top leaders pledged to “vigorously” boost spending but provided scant details and minimal financial backing.
The government’s budget and annual work report set an optimistic target of 5 percent growth, but offered little insight into how this would be achieved without a surge in exports, which face challenges due to increased tariffs imposed by the United States and other countries.
According to Tao Wang, chief China economist at UBS, significant obstacles to growth remain, including an unstable property market and low consumer confidence. Wang emphasized that policy measures need to play a crucial role in addressing these issues.
China is currently experiencing deflation, a situation where many prices are falling, which has negatively impacted both companies and households. To combat this, the leadership set a consumer inflation target of 2 percent, the lowest in two decades, aiming to improve household wealth.
To achieve this, the government plans to expand the social safety net, including a modest increase in minimum old age pensions and promises of child care subsidies and improved elderly services, although specific details were lacking. The government aims to encourage consumer spending on items like home appliances and entertainment, with some cities, such as Shanghai, offering discounts through vouchers.
However, nationwide vouchers were not announced, and the focus remained on subsidies for consumers trading in old goods. Additionally, the government aims to create 12 million urban jobs to maintain an unemployment rate around 5.5 percent.
The success of the artificial intelligence start-up DeepSeek has prompted a renewed focus on the private sector, with the government prioritizing technological innovation as part of its goal for self-sufficiency in technology. This shift follows a recent meeting between Xi Jinping and prominent entrepreneurs, signaling a potential easing of the previous crackdown on the tech sector.
Despite these initiatives, the government is facing financial constraints. Tax revenue has been weaker than expected, leading to a widening budget deficit. Notably, revenue from the value-added tax, a key source of income for the government, fell by 3.9 percent last year, prompting a cautious outlook for recovery in the current year.