(Bloomberg) -- China said it will give one-off cash handouts to residents facing hardship and vowed more benefits for some unemployed people, in a rapid-fire round of measures seeking to boost consumption and allay growing economic anxiety ahead of a key national holiday.
The government announced the handouts and subsidies on Wednesday, a day after top officials boosted the market with a broad policy package aimed at arresting a growth slowdown that has battered consumer confidence and spurred labor protests. On the same day, Shanghai said it would issue more than 500 million yuan in consumption vouchers to encourage spending in a city as populous as Australia.
The imminent weeklong National Day break is adding pressure to boost public sentiment, as the nation of 1.4 billion people prepares to huddle with family, potentially spreading the economic gloom. The monetary easing unveiled Tuesday raised anticipation for more measures in the coming days, when President Xi Jinping’s 24-member Politburo is set to meet.
“The move is intended to showcase fiscal policy is being strengthened,” Zhaopeng Xing, senior strategist at Australia & New Zealand Banking Group, said of the cash handouts. “The ball is in the finance ministry’s court.”
Consumer stocks led gains in China and Hong Kong with a consumer staples subgauge up as much as 3.5% in the mainland, taking its advance since Tuesday to more than 12%. In Hong Kong, bar chain operator Helens International Holdings Company rose as much as a record 36%, while sportswear makers Anta Sports Products and Li Ning Company each gained at least 9%.
The Chinese government didn’t say how many people will benefit from the cash handouts or their total value in a brief statement. It called for local authorities to ensure the funds reach their recipients before Tuesday, the 75th anniversary of the founding of the People’s Republic, to show “the party and the government’s love and care for people in need.”
China’s ministries budgeted 154.7 billion yuan ($22 billion) for financial assistance and subsidies to people including those earning the lowest income, in extreme poverty, orphans and the homeless this year, according to a government notice in April. It’s unclear if the coming one-time allowance will come out of this budget.
The deployment of one-time handouts within such a short period of time appears to be a departure for a government that has long eschewed what Xi calls welfarism, raising expectations for more fiscal intervention to stimulate consumption, which has been dragged by a yearslong property sector slump.
“The cash handouts ahead of the national holiday shows that local and central governments are being more direct and proactive in policy support, similar to the central bank moves this week,” said Marvin Chen, a equity strategist at Bloomberg Intelligence. “Sentiment across China consumption sectors may improve in the near term with such coordinated stimulus.”
While it’s common for the government to grant cash subsidies to the poor ahead of traditional Chinese festivals like the Lunar New Year, it’s rare for such aid to be distributed to such a wide group of people around the National Day. In 2015, the authorities handed out one-off living subsidies of 5,000 yuan ($712.15) per person to World War II veterans before Oct. 1 as part of events marking the anniversary of the end of the war.
Also on Wednesday, the State Council said it will provide some social security benefits for college graduates who haven’t found a stable job two years after leaving school in an effort to boost employment. The country introduced a similar initiative in 2020 when the pandemic first hit.
“The roll-out is aimed at maintaining social stability before the holidays,” said Neo Wang, Evercore ISI’s New York-based managing director for China research.
The country had 40.4 million people covered by monthly government subsidies meant as “lowest living standard guarantee” as of the end of June, according to data from the Ministry of Civil Affairs. Another 4.74 million were deemed in “extreme poverty,” which includes people without working capability, whose income is lower than the local minimum social security standards, or with no legal supporters to depend on.
Separately on Wednesday, Shanghai unveiled a plan to distribute a total of 522 million yuan in coupons through the end of the year for consumers to spend on dining, hotels and movies. In 2022, the city earmarked fiscal funds for the first time for 1 billion yuan in electronic coupons to boost consumption following months of pandemic lockdown.
The National Day is one of the most important holidays in China that usually see massive traveling and consumption. But the property crisis and a gloomy job market have weighed on spending, leading some economists to call for more direct fiscal intervention to lift sentiment.
Huang Yiping, a member of the People’s Bank of China’s monetary policy committee, urged the government to step up spending to address weak consumption in a rare critique of China’s economic policies earlier this year. Cash handouts to households would boost consumer spending, he said, while an excessive focus on fiscal health could hinder the economy.
--With assistance from Foster Wong, Jacob Gu, April Ma and Kelly Li.
(Updates with details and comments throughout.)
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