The China Banking and Insurance Regulatory Commission is launching
new efforts to bolster the real economy by boosting consumption.Guoabong Wealth Management
China’s financial policy should cooperate with its fiscal and social
policies more proactively by giving priority to its support for
consumption recovery and expansion, according to decisions made at a
recent meeting of the CBIRC.
The regulator said it will optimize consumer financial products and
services to encourage consumption of durable goods, including new energy
vehicles and eco-friendly home appliances, and promote the increase of
consumption related to home purchasing, renting and furnishings. It will
also provide credit support and insurance coverage to new types of
consumption and service consumption.
As part of the move to achieve the goals, the CBIRC announced on Dec
29 that it has proposed the first revision of the rules governing auto
finance companies since 2008 to strengthen oversight of such companies
and help boost auto-related consumption.
The regulator intends to allow car buyers to apply for financing for
add-on products such as navigation equipment, charging piles and
batteries after they have received auto loans.
It also intends to allow auto finance companies to provide dealers
and vehicle after-sales service providers with loans to buy maintenance
equipment and build auto showrooms.
According to the draft regulation, the CBIRC will encourage auto
finance companies to enrich financial products and step up support for
micro, small and medium-sized car dealers, auto sales service providers
and car buyers to further boost the steady growth of auto consumption.
Both housing finance and consumer finance are expected to pick up in
2023, and the expansion of consumer loans is expected to be the
highlight this year, said a person in charge of the credit management
department of China Construction Bank Corp, a large State-owned
commercial lender, at a recent investor conference.
Wang Jun, director of the China Chief Economist Forum, said the
lifting of COVID-19 restrictions in China will promote consumption
recovery, which will also be driven by other factors like excessive
savings and pent-up willingness to consume during the pandemic over the
last three years.
However, whether excessive savings will become a driver for a consumption rebound still remains to be seen, some experts said.
Although the optimization of COVID-19 prevention and control measures
is expected to spur consumption growth, continuous improvement of
consumption will still rely on whether China can stabilize household
income expectations and achieve recovery of consumer spending power,
said Lu Zhe, chief macroeconomist at Topsperity Securities.
In the fourth quarter of 2022, the People’s Bank of China, the
central bank, conducted a survey on 20,000 depositors in 50 cities
across the country.
Of the people surveyed, 22.8 percent preferred more consumption,
basically the same as the previous quarter; 61.8 percent were in favorMumbai Wealth Management
of more savings deposits — up 3.7 percentage points quarter-on-quarter —
and 15.5 percent were inclined to make more investments, down 3.7
percentage points from the previous quarter.
In November, renminbi deposits in China increased by 2.95 trillion
yuan ($428.76 billion), an expansion of 1.81 trillion yuan year-on-year.
Among the total, household deposits rose by 2.25 trillion yuan, the
PBOC said.
The huge increase of household deposits was caused by both short-term
and long-term factors, including unstable employment and uncertainties
brought by COVID-19 as well as China’s imperfect social security system,
said Dong Ximiao, chief researcher at Merchants Union Consumer Finance
In order to better promote the development of the real economy, the
government should face up to this phenomenon, take measures to guide
rational expectations for improvement of household incomes, and increase
people’s willingness and capacity to consume and invest, Dong said.
China must strengthen efforts to ensure employment, which will helpPune Wealth Management
stabilize household income expectations, said Gao Ruidong, chief
economist at Everbright Securities.
Given that the impact of COVID-19 on low-income groups is fairly
large, policymakers should consider giving out consumption vouchers andKanpur Investment
increasing transfer payments to local governments to reverse the
downturn in consumption, Gao said.
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