MNI: China To Expand Consumption Stimulus In New Year-Sources

China will expand consumer subsidies, supported by fiscal and monetary stimulus, early in 2026 in order to boost sluggish domestic demand and ensure the economy grows by the targeted 5% next year, sources close to policymakers told MNI.

A consumer trade-in scheme will be increased from last year’s CNY300 billion and 2024’s CNY150 billion, while regulatory changes will aim at boosting sales of goods such as cars and services including online streaming, sporting events and other leisure activities. The subsidies will also be expanded to more types of goods, particularly in the green and smart device categories, sources said.

Part of the additional funds for the consumer trade-in scheme will be front-loaded soon, according to one source, noting that such a move was unusual as new public borrowing is usually only announced at the annual Two Sessions meeting which does not begin until March 4.

Funding for the stimulus will primarily come from the issuance of special treasury bonds, which are dedicated to specific purposes and are usually not included in headline fiscal numbers, as well as structural monetary tools including the People’s Bank of China’s targeted relending facility for services and care for the elderly. 

Despite calls by some government advisors for a boost to national subsidies for services consumption, authorities remain cautious. Some government officials have argued that cash subsidies for childcare and increasing pensions would be a more fundamental solution, given low levels of social security provision.

In order to enhance the effect of the stimulus, the Two Sessions meeting will also approve measures to support labour-intensive industries, and to boost vocational training and the supply of jobs for graduates, in a bid to encourage citizens to reduce their precautionary savings, sources said.

HIGH TARGET

While China only needs to grow at an average 4.17% over the next decade in order to meet the goal announced in 2020 of doubling per capita GDP by 2035, sources said policymakers are conscious that trend growth has been declining by about one percentage point every five years, so they want to make a strong start to the 15th Five-Year Plan and achieve at least 5% growth in 2026. (See MNI: China's Positive 2026 Policy Tone Aimed At 5% GDP)