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Facing Trump tariffs, China outlines plan to bolster the economy.


Date: 17-03-2025
Subject: Facing Trump tariffs, China outlines plan to bolster the economy
The Chinese government and the Communist Party jointly issued a lengthy list of planned initiatives Sunday to encourage people to spend more, in yet another move by Beijing to offset potential harm from its escalating economic warfare with Washington.

Their road map for economic stimulus included larger pensions, better medical benefits and higher wages -- measures that could bolster China's lagging domestic consumption. But it assigned many of these tasks to the country's local governments, a large number of which are struggling under enormous debts and plummeting revenues from a decline in the sale of state land.

The action comes as China's leaders are searching for ways to rebalance the economy away from its dependence on an ever-rising trade surplus, which reached almost $1 trillion last year. President Donald Trump has imposed 20% tariffs on China's shipments to the United States. Countries in Europe, Latin America, Africa and the Middle East are also raising tariffs on China's expansive manufactured-goods exports.

Part of the document released Sunday seemed aimed at reassuring the Chinese public that their investments were safe, so that they would start spending money again. Authorities promised to undertake "multiple measures to stabilize the stock market" and to underpin the real estate market, which has been marred by falling property prices.

A housing market crash in the past three years has wiped out much of the savings of China's middle class. Chinese households have responded by curtailing their spending on hotels, restaurants and other services and putting their savings into bank accounts, despite earning very little interest.

Data released by China's National Bureau of Statistics on Monday confirmed the trend, showing that consumer spending remains weak while manufacturing, which produces goods in large part for export to foreign markets, stayed strong. Retail sales rose 4% in January and February compared with the same months last year, in line with what economists expected, while industrial output was up 5.9%, stronger than expected.


Construction continued to be China's biggest weakness during the first two months of this year. Building started on 29.6% fewer apartments and other housing in January and February compared with the year before.

One bright spot of late for China has been its stock markets. In the United States, the tariffs and uncertainty caused by Trump's policies dragged the S&P 500 last week into a correction, down more than 10% from its peak. But China's markets have been up so far this year, partly on enthusiasm for the country's progress in developing its own artificial intelligence programs.

Hong Kong's stock market, where many Chinese companies trade, is up about 20% since Trump's inauguration. Share prices continued to rise Monday in Hong Kong but were little changed in Shanghai and Shenzhen.

The "Special Action Plan to Boost Consumption" was issued in the name of two of the highest organs of power in China: the General Office of the Cabinet and the General Office of the Central Committee of the Communist Party. The unusual step showed that Beijing's leaders want to signal that they are serious about addressing lackluster domestic spending.

Senior officials are scheduled to speak at a news conference Monday afternoon in Beijing about the initiatives to increase consumption.
The plan includes many details that could prove popular with the Chinese public if implemented. It calls for local governments to issue payments or increase subsidies to "people in need" and increase retirees' pension benefits. It also directed local governments to pay their overdue debts to businesses.

But the outline released Sunday contained no new promises of money from the national government to help local governments pay for all of this.

China's local governments, which are responsible for almost all social spending, raised most of their money until three years ago by selling state land to private sector developers. But these sales have collapsed because of the housing market crash.


Source Name : Economic Times
 

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