China’s Initiative to Enhance Domestic Consumption Amid U.S. Tariffs
China has launched a comprehensive plan to boost domestic consumption in response to U.S. tariffs. The plan includes initiatives to increase incomes and support for replacing old goods. Despite a positive start to retail sales this year, challenges like deflation and reliance on exports persist, with economists warning of potential hurdles to sustained economic recovery.
On Sunday, China initiated a comprehensive “special action plan” aimed at enhancing domestic consumption to alleviate the economic fallout from tariffs imposed by U.S. President Donald Trump. Although ambitious, details remain vague, encompassing measures to increase incomes, implement a childcare subsidy system, and expand a program to replace old goods such as cars and electronics.
This initiative follows Premier Li Qiang’s commitment made during a significant political meeting earlier in the month, where he assured that China’s economy would “sail steadily toward the future.” Premier Li has set a growth target of approximately 5% for the year, advocating for increased domestic spending to reduce reliance on exports amidst a decelerating economy.
China’s economic landscape faces challenges, including subdued consumer spending, an uncertain job market, and a downturn in the property sector. The country is also encountering international pressures as the United States intensifies trade tensions, having recently doubled tariffs on all Chinese imports to 20%.
In retaliation, China has imposed a new set of tariffs on U.S. agricultural products, which took effect last week. Recent data from the National Bureau of Statistics (NBS) indicated a retail sales increase of 4.0% from January to February, surpassing December’s 3.7% rise and aligning with economists’ forecasts.
According to Zichun Huang, an economist at Capital Economics, “China’s economy had a decent start to the year, likely driven by fiscal stimulus,” although he cautioned against expecting a sustained recovery due to overarching economic challenges. Persistent deflation continues to undermine consumer spending as individuals anticipate further price declines, adversely affecting economic growth.
The NBS recently reported a 0.7% decline in the Consumer Price Index for February compared to the previous year, marking the lowest inflation level in over a year. Industrial production exhibited a growth of 5.9% during the first two months of the year, marginally exceeding Reuters’ expectations of a 5.3% increase, with data compiled to reflect the impact of the Lunar New Year holiday.
The announcement of China’s new initiative to boost domestic consumption signifies a proactive step in addressing economic challenges posed by U.S. tariffs. While the plan aims to enhance spending and stabilize economic growth, persistent issues such as deflation and low consumer confidence present significant hurdles. Analysts remain cautious, noting that although there has been a slight uptick in retail sales and industrial production, broader economic recovery may be slow and unstable.
Original Source: keyt.com
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