China will take steps to revive consumption by boosting people’s incomes, according to the official Xinhua News Agency, as part of a plan that adds to recent pledges by the government to support demand in an economy threatened by Donald Trump’s tariffs.
The guidelines that came from a State Council report set out other measures such stabilizing the stock and real estate markets, and offering incentives to raise the country’s birth rate. Investors await further clues from top officials during a press conference set to be held 3 p.m. Monday on steps to boost consumption.
Policymakers in China increasingly recognize that a broad recovery in incomes is necessary to encourage people to boost spending. At parliamentary meetings this month, the country’s leadership made boosting consumption the top priority of the annual work report for the first time since President Xi Jinping came to power over a decade ago.
“Households can’t spend what they don’t have,” said Lynn Song, chief economist for Greater China at ING Bank. “While there are few new details on how the government will increase spending, the details of the plan show a greater determination to tackle China’s consumption problem this year.”
The latest effort, which covers eight areas, outlines plans to improve childcare and includes a pledge to enforce China’s paid leave system. Local governments have already started to increase support for social wellbeing, with Hohhot, the capital of the Inner Mongolia Autonomous Region, announcing new childcare subsidies.
Ambitious goal
The program made public on Sunday elaborates on some of the measures announced by Premier Li Qiang earlier this month when he delivered the government’s annual work report to the national parliament in Beijing. China has set an ambitious economic growth goal at about 5% for 2025 and brought its fiscal deficit target to the highest in over three decades.
Lifting consumer spending is key to countering US policies that are upending global trade and causing a slowdown of Chinese exports, which contributed to nearly a third of the country’s economic expansion in 2024. At the same time, China is still grappling with a prolonged property slump that has suppressed demand and kept prices low throughout the economy while wages stagnate.
Reviving consumption has been a challenge for the government since the end of the pandemic. Retail sales have been anemic while consumer prices fell into deflation in February for the first time in over a year.
Beijing will promote “reasonable growth” in wages and establish a sound mechanism for adjusting the minimum wage, Xinhua reported. It will also look at setting up a childcare subsidy system, as well as strengthening how investment can support consumption.
“Compared to previous plans focused solely on supply-side improvements or old-for-new policies, the plan also touches on the need to improve income,” Jefferies analysts including Anne Ling wrote in a note. “We believe the government is placing more focus on securing the welfare of lower-income groups.”
Chinese stocks rallied the most in two months on Friday after the State Council, China’s cabinet, announced that officials from the finance ministry, the central bank and other government departments plan to discuss measures to boost consumption on Monday.
“With a few measures taking place such as trade-in extensions and maternity support by some cities, the guidelines could be read positively by the market amid the current rally,” Morgan Stanley analysts including Lillian Lou wrote in a note.
This story was originally featured on Fortune.com
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