China introduces 'special action plan' to boost country's consumer spending

CGTN Europe spoke to Hong Hao, Chief Economist at GROW Investment Group.

Transcript

00:00Hong Hao is the chief economist at the Grow Investment Group.

00:03I asked him for his response to the special action plan to boost consumer spending.

00:09In today's press conference, there's a lot more details that is coming up,

00:16you know, how to use the policies to support consumption going forward.

00:20Specifically, you know, we're seeing, you know, mentioning about increasing people's base salary,

00:27increase unemployment benefit, and also increase social safety net for people who are getting older

00:35and retiring from the workforce. And these are very sort of a comprehensive work plan.

00:40So it's actually showing, you know, where the Chinese economy is heading and where the policy

00:46is going to guide the development of economy going forward. So, you know, I think right now,

00:52we have a top-down mandate. As you know, in China, everything is top-down, right? So once

00:58the central government has made up its mind, then the policy directive will be sent to the

01:04local regional government for them to execute. So having said that, you know, because we've

01:10been talking about this for years, and now we're, you know, making an initial

01:16baby step forward, a lot needs to be done, especially on the provincial, on the city level.

01:21Is boosting domestic consumption in China really enough?

01:26Especially for this year, if you only rely on consumption to drive growth,

01:30it could be a big ask, right? So because we've just started, and also consumption is still

01:36relatively small part, smaller part of the economy. I think right now, consumption takes up,

01:41you know, less than 50%. It's about 45, 46% of GDP. It's substantially less than

01:48countries at the similar development level as China, right? So a lot needs to be done.

01:54And also, you know, in terms of the trade war, you know, because much of the industrial capacity

02:00are now, you know, oversupplied, and therefore, you know, the price pressure

02:06on the domestic economy is going to be huge. So I think it's a monumental task.

02:15And finally, we have had data out today showing growth in retail sales and industrial production.

02:21What is your outlook for China's economic growth in the months to come?

02:26Yeah, I think today's IP industrial production is actually a bit stronger than expected. Reason

02:32being because of the trade war, you know, many people, many businesses are trying to front run

02:38the tariff, trying to stock up on cheaper goods, you know, before the trade war begin. So I think

02:45as a result, you know, if you see the exports numbers, and also the IP numbers are very,

02:51very strong. Also consumption number is higher than expected as well. But having said that,

02:56you know, because of this one-off impact from trade war, I think going into the second quarter

03:01of the year, we will start to see some signs of slowdown, especially in the export sector

03:07and the manufacturing sector. And I bet that it's already happening. You know, for example,

03:12if you look at the leading indicator of export order, it's starting to decelerate. So I think,

03:19you know, it would make it much more difficult to grow towards 5% this year. I think, you know,

03:28besides better consumption, besides, you know, some investments towards higher manufacturing

03:35and high-tech sectors, much still needs to be done, you know, to get to the lowest target of

03:415% this year.