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Everyone knows that China’s economy is going through a slowdown.
The world’s second-largest economy in August witnessed factory output hitting its lowest level and retail sales showing their weakest growth in over a year. Meanwhile, China’s real estate sector, which has been on the slide since 2021, remains a drag on the country’s growth.
There are also reports that local governments are crunched for cash and that Xi Jinping is cracking down on bureaucrats and pushing austerity. All this comes in the backdrop of tense negotiations with US President Donald Trump for a trade deal.
Now, China has unveiled a slew of measures which it hopes will boost consumption. However, rather than focus on building and manufacturing, Beijing will be looking to expand its services sector.
What we know about the plan
The plan was announced by the
Ministry of Commerce in concert with several other agencies including the finance ministry and central bank.
It comprises nearly two dozen measures that aim to boost consumption in the fields of cultural tourism, entertainment, elder care, sports and health.
The measures include:
Developing infrastructure for services
Encouraging financial institutions to lend more
Allowing foreign and private players into telecoms and high-end medical care
Hosting more international sporting events
Extending the operating hours of museums and tourist sites
Relaxing visa and tourism policies to bring in more foreigners
Promoting China as a place to take leisure vacations
Beijing has said it will support local governments in holding mass sports activities, and develop high-profile boutique events, professional leagues and sports brands. China said it would use central government funds and local special bonds to support the construction of cultural, tourism, elderly care, childcare and sports facilities.
It will further expand visa-free entry. Beijing in 2025 allowed visitors from over 70 countries to visit China for 30 days without a visa. The development came as Beijing looked to revive tourism and boost its economy.
Ironically, the plan does not heavily rely on new large-scale subsidies. Instead, most measures are regulatory, facilitative (credit, investment, market access), and infrastructure-oriented.
China said monetary policy tools will be deployed to encourage financial institutions to expand credit supply in service consumption and increase lending to businesses in the sector.
China has also allocated $32.47 billion i n special treasury bonds for a consumer goods trade-in programme, focusing on home appliances, mobile phones, and tablets.
Why China is moving in this direction
This comes as China’s factory output and retail sales reported their weakest growth since last year in August.
Industrial output increased just 5.2 per cent year-on-year, according to the National Bureau of Statistics data. This is the lowest rise since August 2024. In July, that number was 5.7 per cent.
Retail sales, which measure consumption, meanwhile increased just 3.4 per cent in August. That number was the lowest since November 2024. In July, the figure was 3.7 per cent.
Beijing has been trying to stimulate spending. In August, China unveiled interest subsidies for businesses in eight consumer service sectors including catering and tourism, in a bid to support services consumption amid a slowing economy.
What do experts say?
Some say the plan makes sense.
Chinese economists and policy advisers have called for stepping up support for the country’s burgeoning services sector to boost consumption, which top leaders made a priority this year to spur growth amid US tariff disputes.
Yuhan Zhang, principal economist at think tank The Conference Board’s China Centre, told CNBC that Chinese investments in manufacturing overall have witnessed “modest and uneven growth.”
However, service consumption led by travel, leisure and transport has increased – which points to a slow move in spending on services, Zhang added.
Experts say more stimulus will likely be needed if China is to remain on track to its growth target of five per cent.
“The strong start to the year still keeps this year’s growth targets within reach, but similar to where we were at this time last year, further stimulus support could be needed to ensure a strong finish to the year,” said Lynn Song, chief economist, Greater China at ING.
“While it is too early to gauge the impact of the consumer loan subsidies coming into effect in September, it is likely that more policy support is still needed, given the broader slowdown across the board. We continue to see a high possibility for another 10bp rate cut and 50bp RRR cut in the coming weeks.”
In August, Lu Feng of Peking University told Bloomberg Law, “China needs to spend more heavily on public welfare in the coming decade to expand consumption to the point where it accounts for around half the economy.”
Fixed-asset investment also grew at a slower-than-expected 0.5 per cent pace in the first eight months year-on-year, from 1.6 per cent in January-to-July, marking its worst performance outside the pandemic.
Authorities are leaning on manufacturers to find new markets to offset US President Donald Trump’s unpredictable trade policy and weak consumer spending.
Chinese households, which have seen their wealth shrink in the real estate downturn, have tightened their purse strings as business confidence falters, dampening the jobs market.
Unemployment edged up to a six-month high of 5.3 per cent in August, from 5.2 per cent in July and 5.0 per cent in June, according to data from the National Bureau of Statistics (NBS).
“We should be aware that there are many unstable and uncertain factors in the external environment, and national economic development is still confronted with multiple risks and challenges,” the statistics bureau said.
“We must fully implement macro policies, focus on keeping employment, businesses, and market expectations stable, deepen reform and opening up and innovation, so as to foster steady and healthy economic development.”
The NBS spokesperson Fu Linghui at a press conference said it remains difficult to know if consumer inflation has reached an inflection point.
Fu warned that there are “many unstable and uncertain factors in the external environment” and that the economy faces “multiple risks and challenges.”
It remains to be seen whether China can get its economy back on track.
With inputs from agencies
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