China – the idea of government-issued consumption vouchers are back into the spotlight

China’s latest economic data is confirming that the world’s second-largest economy continues to struggle. Hitting its 5% growth target may require more drastic measures, fueling expectations for further government intervention.

July’s data showed:

• home prices dropping at the fastest rate in nine years
• industrial output slowing
• rising unemployment
• even where data beat forecasts, underlying issues persist, such as inflation driven by bad weather and frontloaded chip imports due to looming US tech restrictions

• Analysts are now speculating that Beijing might be forced to ramp up fiscal support, possibly widening the budget deficit to 4% of GDP (from currently 3%) and even issuing shopping vouchers to boost consumer spending. Also, a top policy adviser hinted that China could bring forward next year’s bond issuance if growth doesn’t rebound soon

Skepticism about issuing vouchers remains:

• similar measures during the pandemic had limited success
• while some see vouchers as a quick fix, many believe sustained economic recovery hinges on a rebound in the property and stock markets

This article was written by Eamonn Sheridan at www.forexlive.com.