Depressed domestic consumption amid an uncertain economic outlook is bad news for China.
SHENZHEN - At the entrance of a store selling household appliances in the southern Chinese tech hub of Shenzhen, a banner screams: “Up to 20 per cent off with state subsidies”.Purchasing a new air-conditioner now would shave more than 500 yuan off its 2,699 yuan sticker price, a salesperson tells this reporter, pointing to an energy-efficient model.
While consumer inflation in August reached 0.6 per cent on the back of higher food prices, core inflation, which measures consumer prices without the volatile food and energy categories, dipped to 0.3 per cent – the lowest in more than three years. The fear is that if demand keeps dropping and prices fall, expectations that things will be cheaper in the future could lead consumers to postpone spending, further perpetuating the cycle.
This campaign, first rolled out in March, aims to entice Chinese shoppers to purchase new big-ticket durable items such as cars and home appliances by dangling subsidies and rebates on trade-ins. It also supports the upgrading of industrial equipment. But despite the Chinese government having long spoken of the need to boost consumption, moving the needle has proven difficult.
Households also lack alternative channels to make money, since the property and stock markets – where people usually grow their wealth – have been doing badly, he added.
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