China urged to give cash handouts, as its economy and most vulnerable citizens are desperate for a lifeline

Zero-Covid strategy is increasingly punishing China’s economy, with no end in sight, and many consumers are hoarding what little savings they have

China has resisted doling out the type of ‘extraordinary’ stimulus payments seen in United States and Europe, but some economists say this must change

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Some say the time has come for China to consider cash handouts to boost consumption and stimulate the economy. Photo: Xinhua

Published: 10:30pm, 28 Apr 2022Updated: 11:30pm, 28 Apr 2022

There are growing calls in mainland China to issue direct stimulus payments to consumers – like those that have been distributed in Hong Kong and the United States – to boost the economy that is being increasingly strained and tested by the nation’s zero-Covid strategy.

Beijing has made repeated efforts to reverse the trend of sluggish consumer spending since the pandemic hit more than two years ago, but economists say that more must be done to get people to open their wallets.

Consumer confidence remains worryingly low in China as the nation unwaveringly sticks to its draconian coronavirus-control measures to stop the highly infectious Omicron variant.

Some local authorities have already turned to their old playbook by issuing coupons to stimulate spending, but the nation’s financial regulators previously warned about the negative impacts of large-scale economic stimulus measures in the West.

Li Xunlei, chief economist at Zhongtai Securities, is among those who say the mainland could take a page out of Hong Kong’s playbook by handing out consumption vouchers.

By his estimations, if central authorities and the nation’s wealthiest 20 per cent contribute a combined 250 billion yuan (US$38 billion) a year, and that money is distributed to the nation’s 280 million lowest-income residents, it could help boost annual consumption spending by 750 billion yuan.

Another option, he said, could be to distribute 1,000 yuan (US$153) to all 1.413 billion Chinese citizens, which he said would be easier and less controversial, despite placing greater financial pressure on the government.

“Consumption vouchers should be issued by the central government … the sooner [they] are issued, the better,” Li said in an interview published by the China Finance 40 Forum think tank on Wednesday.