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The Chinese State Council has launched a comprehensive "Special Action Plan to Boost Consumption" aimed at reinvigorating domestic demand amid ongoing economic challenges. The initiative, announced on March 16, represents Beijing's strategic response to persistent deflationary pressures and reduced consumer confidence.
Recent economic indicators reveal concerning trends, with February's consumer price index recording its steepest decline in over a year. The producer price index has remained in negative territory since October 2022, signaling continued manufacturing weakness.
"Vigorously boost consumption, expand domestic demand in all directions, improve consumption capacity by increasing income and reducing burdens," stated the Council's report outlining the nationwide directive to all regions and departments.
The plan follows Premier Li Qiang's work report to the National People's Congress last week, which prioritized household spending to offset weak external demand. Officials face mounting pressure to implement consumer-focused stimulus measures as China seeks to reduce its dependence on exports and investment for growth.
Income enhancement forms a central pillar of the strategy. The plan calls for boosting both urban and rural earnings, with specific measures targeting farmers through housing reforms. Additional initiatives include employment support programs and continued implementation of unemployment insurance policies.
Tourism promotion features prominently in the action plan. Support will be directed toward developing globally recognized winter tourism destinations in ice and snow regions. The government also intends to expand unilateral visa-free arrangements and optimize regional entry policies to attract visitors.
Financial market stabilization measures are mentioned but lack specific implementation details. The plan promises "multiple measures" to stabilize the stock market and develop bond products suitable for individual investors, though without concrete timelines.
Lynn Song, ING's chief economist for Greater China, told CNBC: "While the plan does not seem to contain anything too new, setting this out as an action plan signals that concrete steps at local levels will follow." She emphasized that the initiative demonstrates China's commitment to addressing structural issues including wage stagnation and insufficient social safety nets.
Chinese leaders previously pledged an additional 300 billion yuan ($41.45 billion) in ultra-long special treasury bonds for consumer subsidy support during January's parliamentary meeting.
Richard Harris, chief executive at Port Shelter Investment Management, underscored the urgency of domestic economic revitalization: "The authorities are determined to stimulate the economy... even if we see some issues with the export side of the economy, they are determined to get the domestic economy going. Because they have to."
Market reaction has been muted thus far, with China's CSI 300 index and Hong Kong's Hang Seng index registering modest gains of approximately 0.1% following the announcement.
