Record drop in consumption, China's commercial capital launches "super-huge" stimulus package

Shanghai (China) has just announced plans to issue discount vouchers and promotional offers worth up to 500 million yuan to boost consumption following the government's economic stimulus package.

Tiêu dùng giảm kỷ lục, thủ đô thương mại của Trung Quốc tung gói kích cầu 'siêu khủng'

The city of Shanghai (China) has just announced plans to issue discount vouchers and promotional offers worth up to 500 million yuan to boost consumption following the government 's economic stimulus package. (Source: Bloomberg)

The announcement came a day after the People's Bank of China (PBOC) announced on September 24th a monetary easing policy along with other measures to support the real estate sector, aimed at reviving the economy.

PBOC Governor Pan Gongsheng announced a further 50 basis point (0.5%) reduction in the reserve requirement ratio (RRR) for banks. Interest rates on home loans will also be lowered by an average of 0.5%. This will ease the burden on households, but may raise concerns about bank profitability. Several other savings and lending rates are also expected to be adjusted in the near future.

This is the largest stimulus package ever implemented by China's commercial capital, aimed at boosting consumption across various sectors, including the food and beverage and hospitality industries, according to plans announced by the city government on September 25.

This initiative also marks Shanghai's first major move in response to the government's economic stimulus package, demonstrating the local authorities' efforts to get the world's second-largest economy back on track to achieve Beijing's target of around 5%.

"The timing and scale of the new consumer stimulus package are crucial," assessed Fu Weigang, Executive Chairman of the Shanghai Institute of Finance and Law Research.

The stimulus package comes amid a significant drop in Shanghai's retail sales in recent months, as many restaurant owners and businesses struggle to maintain profitability due to consumers tightening their belts and being more cautious in their spending.

According to the city government, vouchers totaling 360 million yuan will be distributed to city residents to save on dining expenses; 90 million yuan to subsidize hotel stays; 30 million yuan for discounts on entertainment and movies; and 20 million yuan for users attending sporting and public events.

The vouchers will go on sale later this month and will be distributed as electronic discount coupons in two phases through designated payment platforms such as WeChat Pay.

The first phase, running from late September to October, will focus on dining and movie vouchers during the National Day "Golden Week" holiday to encourage peak spending and attract tourists. The second phase, from November to December, will focus on dining and sports vouchers.

Shanghai, often dubbed China's "consumer capital," reported a 6.8% year-on-year drop in retail sales last month due to weak consumer spending. The food and beverage industry was among the hardest hit, with profits for many restaurants and eateries plummeting.

According to the Shanghai Statistics Bureau, companies with annual revenues exceeding 2 million yuan in the city lost 770 million yuan in the first six months of this year.

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