Shanghai (China) has just announced a plan to issue discount and promotional vouchers worth up to 500 million yuan to boost consumption after the Government's economic stimulus package.
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| Shanghai (China) has just announced a plan to issue discount and promotional vouchers worth up to 500 million yuan to boost consumption after the Government 's economic stimulus package. (Source: Bloomberg) |
The announcement was made one day after the People's Bank of China (PBOC) announced monetary easing and many real estate support policies on September 24 to revive the economy.
PBOC Governor Pan Gongsheng said banks would be cut their reserve requirement ratio (RRR) by 50 basis points (0.5%). Interest rates on home loans will also be cut by an average of 0.5%. This will ease the burden on households, but could raise concerns about bank profits. Other savings and lending rates will also be adjusted in the coming time.
This is the biggest stimulus package ever rolled out by China's commercial capital, aimed at boosting consumption in many sectors, including the catering and hospitality industries, according to plans announced by the city government on September 25.
The initiative also marks Shanghai's first major move to respond to the government's economic stimulus package, showing the local government's efforts to get the world's second-largest economy back on track to reach Beijing's target of around 5 percent growth.
“The timing and size of the new consumer stimulus package are important,” said Fu Weigang, executive chairman of the Shanghai Institute for Finance and Law.
The stimulus package comes amid a sharp decline in Shanghai's retail sales in recent months, as many restaurant owners and businesses struggle to maintain profits as consumers tighten their purse strings and become more cautious about spending.
According to the city government, vouchers worth a total of 360 million yuan will be distributed to city residents to save on restaurant dining; 90 million yuan to subsidize hotel stays; 30 million yuan to provide discounts on entertainment and movies; and 20 million yuan to users attending sports and public events.
The vouchers will go on sale later this month and will be distributed as e-coupons in two phases through designated payment platforms such as WeChat Pay.
The first phase will run from late September to October, focusing on meal 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 meal and sports vouchers.
Shanghai, China's consumer capital, reported a 6.8% year-on-year drop in retail sales last month due to weak consumption. The catering industry was one of the hardest hit, with many restaurants and eateries reporting plummeting profits.
According to the Shanghai Statistics Bureau, companies with annual revenue exceeding 2 million yuan in the city lost 770 million yuan in the first six months of this year.
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