China consumer rush for subsidies overloads stimulus programme

[BEIJING] China is testing the limits of what its consumer stimulus can accomplish by subsidising purchases of select goods, fuelling a shopping spree that boosted retail sales growth to the strongest in more than a year but threatening to overwhelm authorities even in the richest regions.
Consumer participation in the home goods trade-in programme has seen provinces quickly running out of funds the national government has so far distributed to pay for the subsidies. Henan and Chongqing have been forced to suspend the granting of subsidies or receiving applications for the handouts, according to recent local government announcements and Chinese media reports, while Jiangsu and Guangdong imposed restrictions on the programme such as managing its daily quota.
The disruptions are putting Beijing at a crossroads as it looks for a longer-term fix to a crisis of confidence among households.
Officials have made expanding consumption their top economic priority this year in anticipation of US tariffs, doubling the amount of ultra-long special sovereign bonds to finance subsidies for the cash-for-clunkers drive from last year to 300 billion yuan (S$54 billion). Just over half of the total has been distributed or is in the process of being disbursed to local governments.
'The rapid use of the subsidies suggests the programme is effective in expanding sales of the products it targets,' said Ding Shuang, chief economist for Greater China and North Asia at Standard Chartered.
'However, considering limitations to the country's fiscal capabilities, we still need sustainable measures to carry on the traction in the long run after sentiment is boosted by the subsidies in the short term,' Ding said.
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The programme has been key to encouraging household purchases of a slew of consumer goods this year. In May alone, home appliances and electronics saw growth in excess of 50 per cent.
The trade-in programme 'should remain supportive for some durable goods sales', according to economists at Goldman Sachs, who also warned in a note that 'its boost may be disrupted in June due to funding shortages in some regions'.
The authorities have said they will distribute a total of 162 billion yuan in two tranches to provinces, with the second allocation announced in late April. Some seven weeks later, the central bank-backed Financial News reported that money is still in the process of being made available to provinces.
While the government may soon roll out the remaining funds planned for this year, economists cautioned that Beijing needs to come up with more sustainable measures to put consumption on track to recovery for the long haul.
Another approach Beijing is taking is relying more on policies aimed at lifting business confidence to encourage private investment and hiring, a shift likely to translate into stronger consumption if sustained over time. Such steps include meeting government arrears to companies and the recent appeal to major electric vehicle makers to make timely bill payments.
Unlike the consumer subsidies, such measures offer no quick payoff but could help consumption in the longer term, according to Ding. For now, he expects speedy follow-up subsidy allocations by the national government to 'maintain confidence' since Beijing is front-loading fiscal incentives this year.
Concern over-reliance on subsidies is also spreading to official circles. A newspaper backed by the State Council, China's cabinet, has said the government 'must improve the income distribution system and try all means to increase income' for residents.
'Boosting consumption cannot just rely on policy stimulus,' according to a front-page editorial carried earlier this month in The Economic Daily.
Mounting fiscal stress is another reason why Beijing's options are narrowing. With tax and land sales revenues in decline, Chinese authorities accelerated borrowing in recent years to fund stimulus measures to support the economy.
Beijing raised its official fiscal deficit – mostly shouldered by the central government – to the highest level in more than three decades this year, and increased the amount of special sovereign bond issuance to 1.8 trillion yuan, 80 per cent more than in 2024. As a result, China's interest bill is increasing quickly, in turn eroding the government's spending power.
But as Donald Trump's tariffs hurt overseas demand and put China's industrial production under pressure, it's unlikely that Beijing will change course on its flagship policy of consumer subsidies any time soon, despite recent hiccoughs.
Some regions may have had to announce a partial suspension of the programme after running out of trade-in funds because of promotions offered during the '618' shopping festival, Morgan Stanley economists including Robin Xing wrote in a note.
Local authorities may also be attempting to smooth the pace of subsidy rollout and prevent 'arbitrage,' they added, in response to efforts by some retailers to benefit from the consumer subsidies by inflating prices.
'These glitches in the consumer goods trade-in programme may be fine-tuned or remedied, but they may also reflect inherent limitations of such stimulus,' the Morgan Stanley economists said. 'Given continued external uncertainty and deflationary pressures, we see a very low risk of the consumer trade-in programme being suspended altogether.' BLOOMBERG

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Despite 1880's closure, private members' club 67 Pall Mall is expanding

Business Times

an hour ago

Business Times

Despite 1880's closure, private members' club 67 Pall Mall is expanding

[SINGAPORE] Private members' club 1880 may have suddenly closed and gone into liquidation this week, but that is no dampener for another player here. 67 Pall Mall, which started operating in Singapore from 2022, has just signed a lease to expand to Shanghai – its first Chinese outpost. The private members' club with a focus on fine wine will open next year at 7 Donghu Road, in Shanghai's historic Xuhui district. It will occupy the 100-year-old French Renaissance-style Grand Mansion – or da gongguan – built by British businessman Raymond Joseph. Grant Ashton, who founded 67 Pall Mall in London in 2015, said that opening a club in Shanghai allows it to connect with the wine community in China, which 'has long been one of the most dynamic and rapidly growing wine markets in the world'. On entering the country despite its economic woes, Ashton said the club's business model offering access to 'one of the largest lists of wines in the region at reasonable prices' has withstood economic ebbs and flows, including extended closures during the pandemic. 'Our proposition is new to the market in Shanghai and China – one that represents unprecedented value and access to fine wines.' He is not concerned about the sudden collapse of 1880 either. The club had also abruptly closed its Hong Kong branch on May 30. A NEWSLETTER FOR YOU Friday, 2 pm Lifestyle Our picks of the latest dining, travel and leisure options to treat yourself. Sign Up Sign Up 'Our membership model has served us well for 10 years,' he told The Business Times. 'We are a very different club with a singular focus, and everything about 67 Pall Mall revolves around the appreciation of wine.' In Singapore, the club occupies 15,000 square feet (sq ft) across the 27th and 28th floors of Shaw Centre in Scotts Road. The space used to be the penthouse dwelling of the late movie magnate Runme Shaw, where he threw extravagant soirees and wined and dined luminaries and celebrities. The club here is 67 Pall Mall's third, after London and Verbier in Switzerland. It had previously announced upcoming club openings in Melbourne, Australia, as well as in France's Bordeaux and Beaune. Members have access to its clubs around the world. Entrance to the Grand Mansion. PHOTO: 67 PALL MALL As for the Shanghai club, it will comprise around 14,300 sq ft and carry a wine list of 5,000 by the bottle and 1,000 by the glass from 40 countries. The mansion's grandeur will be showcased and it will include spaces such as a Grand Salon, a sunroom overlooking the gardens, a whisky bar and multiple private rooms. The Grand Mansion is a former diplomatic landmark that has housed various bureaus and served as the residence of some of China's prominent magnates, including industrialist and banker Sheng Zhushu. It has also hosted several high-profile events, including negotiations between former US president Richard Nixon and former Chinese premier Zhou Enlai, as well as the Asia-Pacific Economic Cooperation summit in China in 2001 attended by then US president George W Bush.

Despite 1880 closure, private members' club 67 Pall Mall is expanding

Business Times

an hour ago

Business Times

Despite 1880 closure, private members' club 67 Pall Mall is expanding

PM Wong to visit China, where he will discuss cooperation to strengthen rules-based order

Straits Times

2 hours ago

Straits Times

PM Wong to visit China, where he will discuss cooperation to strengthen rules-based order

PM Lawrence Wong said he hopes to build closer ties with Chinese leaders, especially with President Xi Jinping and Premier Li Qiang. PHOTO: MDDI PM Wong to visit China, where he will discuss cooperation to strengthen rules-based order SINGAPORE – The world is in a state of flux, and countries big and small have to do their part to manage geopolitical tensions and rivalry carefully so as to minimise the risk of conflict and war, said Prime Minister Lawrence Wong. In an interview with Chinese state broadcaster CCTV ahead of his first visit to China as prime minister, he said a key priority is to discuss broader regional and global developments with Chinese leaders, and explore how both countries can work together to strengthen multilateralism and the rules-based international order. He also said that he hopes to build closer ties with the Chinese leaders, especially with President Xi Jinping and Premier Li Qiang. His visit from June 22 to June 26 was announced on June 20 by Chinese foreign ministry spokesman Guo Jiakun, who said PM Wong will be meeting Mr Xi, Mr Li and Mr Zhao Leji, chairman of the National People's Congress. The visit comes as strategic rivalry between the United States and China has triggered supply chain disruptions, technological decoupling, and growing fears that other countries may eventually be forced to pick sides. The US has also imposed sweeping tariffs on much of the world, including Singapore, with particularly high duties on China. 'We are in the midst of a very messy and unpredictable transition,' PM Wong said in the interview, aired on the CCTV programme Leaders Talk on June 20. He noted that the US had helped shape the global order after World War II – an order that benefited all countries, including China and the US itself – which is now under strain as America signals a desire to pull back from it. 'There is no country in the world today that can replace the US, no one. So what is our alternative? I think frankly, at this stage, no one knows the answer,' he said. PM Wong said it will take time for a new equilibrium to emerge. Unlike the post–Cold War era, which was dominated by a single superpower, he believes the new global order will be shaped by countries both large and small. But in the meantime, the transition is potentially dangerous. 'Without clear global leadership and coordination, there are many things that can go wrong in this world,' he warned, urging all countries to manage geopolitical tensions and rivalry carefully to minimise the risk of conflict and war. ⁠PM Wong will emphasise the importance of upholding a rules-based multilateral order when he attends a World Economic Forum event in Tianjin next week. The event, officially called the ⁠⁠Annual Meeting of the New Champions, is commonly known as Summer Davos. In the interview with CCTV, he acknowledged that today's multilateral system is not perfect, but said it should be reformed and improved – not abandoned – to better serve all countries. Asked about his top concern for Singapore, PM Wong said the increasingly fragmented global environment poses challenges for a small, open economy like Singapore, which depends heavily on trade. But while global supply chains are being reshaped and countries seek greater self-sufficiency, he stressed that trade will continue, albeit in new configurations. Singapore, he said, must stay competitive and relevant to remain a key node in shifting trade and investment flows, and is working with like-minded partners to uphold free trade and a rules-based system. Within Asean, efforts are under way to deepen integration and lower trade barriers. Singapore is also strengthening ties with key Asian economies such as China, India, Japan and South Korea, while reaching out to further markets in the European Union, Latin America, and Africa. 'I believe in every crisis, there will always be opportunities, and so we are finding ways to seize new opportunities for ourselves and for other countries,' he said. Mr Wong described the relationship between Singapore and China as 'a very close and steadfast partnership', nurtured over generations of leaders. 'So I hope to do the same in my visit with Chinese leaders, especially with President Xi and Premier Li, and I think the close ties at the leadership level sets the tone for the overall relationship.' A key objective of his trip to China will be to reaffirm a shared commitment to bilateral cooperation, as Singapore and China mark the 35th anniversary of diplomatic ties. The cooperation led to the three government-to-government projects of Suzhou Industrial Park, Tianjin Eco-city and Chongqing Connectivity Initiative. Asked if he envisioned introducing a new project during his term, PM Wong said that he does not consider existing projects as completed and done with, but platforms that can continually host new areas of cooperation. This is in line with bilateral ties, which were upgraded in 2023 to an All-Round⁠ ⁠High-Quality Future-Oriented Partnership. PM Wong is no stranger to China, having visited almost every year since entering politics in 2011. He described the transformation he witnessed in China as '⁠nothing short of an economic miracle'. In the interview, he expressed confidence in China's economy despite global headwinds, citing its strong track record and capable leaders who are willing to adapt. Most of all, he said, his optimism stems from the determination of the Chinese people to keep moving forward and improve their lives. 'It's a remarkable transformation, and I continue to wish China every success in its journey of modernisation,' he said. Yew Lun Tian is a senior foreign correspondent who covers China for The Straits Times. Join ST's WhatsApp Channel and get the latest news and must-reads.