Editor's note: To boost consumption and expand domestic demand, the Mainland has recently introduced several policy measures, including the Implementation Plan for the Policy of Interest Subsidy for Lending to Entities in the Service Industry and the Implementation Plan for the Fiscal Subsidy Policy for Personal Consumption Loans.
【Anchor】Hello everyone, welcome to DDN Business Insider. I am Yunfei Zhang. Boosting consumption is an important measure to expand domestic demand comprehensively.
Recently, there have been numerous actions taken in mainland China to boost consumption. The recently announced "Implementation Plan for Subsidizing Operating Entities in the Service Industry" and the "Implementation Plan for Fiscal Subsidies on Personal Consumption Loans" are seen as a demonstration of the determination to promote consumption and stimulate domestic demand through multiple approaches. We have invited Zhou Mi, researcher at the Ministry of Commerce, Dong Ximiao, chief researcher at Merchants Union Consumer Finance Company Limited (MUCFC) and deputy director at the Shanghai Institution for Financial & Development, as well as financial commentator Guo Shiliang, to provide analysis and insights.
First, I would like to ask Mr. Zhou to clarify a concept for us: what are the differences in focus between these two "Implementation Plans"?
【Zhou】In brief, one focuses on the supply side, while the other focuses on the demand side. The supply-side support mainly involves financial measures for key service industries, providing financing support for their operating entities. This support includes interest subsidies, primarily aimed at reducing their operating costs. The demand side, on the other hand, targets consumers, enabling them to obtain support for consumption loans through consumer finance.
【Anchor】The interest subsidy policy is quite innovative. How should we evaluate its impact?
【Dong】The subsidy policy sends a clear policy signal, helping to boost confidence and expectations, and promotes high-quality economic development. Through fiscal interest subsidies, on one hand, it will directly reduce household credit costs, enhancing their willingness and ability to utilize consumer credit to expand consumption and improve their quality of life. On the other hand, it will lower the financing costs for business entities in the consumer sector, supporting and encouraging them to maintain continuous production and operations while providing more quality products and services. The subsidy policy will also stimulate effective financing demand from related operating entities and residents, expanding the lending of commercial banks and consumer finance companies for consumption loans and related loans, while keeping interest rates stable at reasonable levels.
【Anchor】Currently, we see that both plans have clear implementation timelines and mention that "after the policy expires, the effects can be studied to consider extending the policy duration and expanding the support scope." What do you think is the reason for such an arrangement, Mr. Zhou?
【Zhou】Indeed, we see that both proposals have specific implementation deadlines. This implementation period can be viewed as an experimental effort. We know that providing financial support to both the supply and demand sides through these two methods has not been attempted before. Therefore, we need to observe the effects, the extent of their impact, and areas for improvement through experimentation. I believe that this observation will help us accumulate more effective experiences in promoting consumption and provide more support in the future.
China's consumption potential is enormous, manifested in our vast market size and the rich supply of products and services. In recent years, promoting consumption has been a significant focus. In the past one or two years, efforts to boost consumption have intensified and become a key aspect of the Chinese economy. I believe that promoting consumption through this approach aims fundamentally to expand the scale of consumers' disposable income, thereby alleviating their concerns and costs associated with consumption. For suppliers, the goal is also to support their service capabilities through financial policies. We see that financial support is provided to enhance their infrastructure and related investment capabilities. I believe these two aspects will lead or guide both suppliers and consumers to engage more in the supply-demand relationship, making our consumption more effectively promoted.
【Anchor】Do you expect that these loan interest subsidy policies might evolve into a relatively long-term consumption support policy? What factors should policymakers consider for long-term feasibility?
【Zhou】Therefore, for the promotion of long-term consumption policies, in addition to enhancing people's purchasing power through the development of the real economy and improving the scale of consumer goods supply, it is also necessary to strengthen the effectiveness of financial policies, including the two policies introduced this time. Long-term implementation does not necessarily mean promoting it in the same way. Personally, I believe that each region and market have differences in purchasing power; some areas have higher income levels and may demand certain categories of goods more. So, if these policies are to be extended long-term, they must consider the differences in consumption markets and adopt targeted approaches in different regions to promote consumption effectively. Additionally, the fiscal impact of such policies should be effectively evaluated. For China's economy, there are indeed many areas that require investment, so long-term execution needs to pay attention to the effectiveness of fiscal policies.
【Anchor】Additionally, among the two schemes, the "Fiscal Interest Subsidy Policy for Personal Consumption Loans" has garnered wider attention because it concerns individual consumers. According to the scheme, during the implementation period, mainland residents can enjoy the interest subsidy for the portion of personal consumption loans (excluding credit card transactions) that is actually used for consumption and can be identified through the loan disbursement accounts. The cumulative interest subsidy limit for each borrower at one lending institution is 3,000 RMB. The subsidy covers general consumption (below50,000 RMB per transaction), as well as key areas of consumption such as household cars, elderly care, childbirth, education and training, cultural tourism, home decoration, electronic products, and health care for transactions of 50,000 RMB and above.
I'd like to ask Mr. Zhou, what do you think is the reason for the policy choosing household cars, elderly care, and seven others key areas as the focus for interest subsidies?
【Zhou】The selected key areas primarily reflect strong consumer demand. However, there may be hesitations in converting this demand into actual purchases due to financial constraints. The production processes of these industries are relatively complex and have a wide-ranging impact. I believe that if we can effectively promote the expansion of consumption in these areas, the influence will not only affect the production of these goods or service providers themselves but will also promote the continuous and effective development of related supply chains and industrial chains.
【Anchor】The personal consumption loan processing institutions include 18 national commercial banks, 4 consumer finance companies, and 1 private bank, totaling 23 financial institutions. After the policy was introduced, several banks on the mainland actively responded last week. Mr. Dong, what does the selection of these processing institutions indicate?
【Dong】These 23 financial institutions have a large scale of personal consumption loans and standardized management. Their execution of the consumption loan interest subsidy policy will help the subsidy policy quickly benefit residents in the short term. Including these four leading consumer finance companies in the first batch of subsidy financial institutions is a significant highlight, as it allows for better utilization of the professional advantages of consumer finance companies in deep market penetration. Additionally, the implementation plan encourages local financial departments to allocate funds themselves to provide interest subsidies for personal consumption loans issued by other small and medium-sized banks and consumer finance companies.
【Anchor】For individual consumers, what should they pay attention to while enjoying the consumption loan subsidy policy?
【Dong】For residents, it is essential to apply for personal consumption loans through formal financial institutions like commercial banks and consumer finance companies to enjoy the benefits of the subsidy policy. Consumers should apply for loans based on their personal and family consumption needs, exercise prudent financial management. They should not apply indiscriminately just because of high limits, low interest rates, or subsidies, and should keep their personal debt burden at a reasonable level. The operating entities must ensure that loan funds are used for compliant business activities. Residents applying for consumption loans should use them for reasonable consumption and not for prohibited purposes such as investments.
【Anchor】Recently, a series of stimulating consumption policies have been introduced on the mainland, including childcare subsidies and free preschool education. Besides encouraging childbirth, these are also seen as measures to boost domestic demand. Mr. Zhou, how do you view the "combined effect" of this series of recent policies?
【Zhou】The "combined effect" approach has been a key model since last year, integrating different policies to complement each other. Each policy may target different aspects or directions, but they can work together effectively. I believe this set of combined policies can enhance consumers' willingness and ability to consume, providing more space and strength to address key issues that constrain the improvement of people's living standards and facilitate high-quality development. The policy combination is not limited to a single model.
【Anchor】Influenced by policies such as childcare subsidies and free preschool education, we have noticed that the A-share maternal and infant sector has been performing actively recently. Mr. Guo, what role do you think these subsidies can play in the real economy or the consumer market?
【Guo】The most direct impact is that the subsidies will be converted into consumption, and the emergence of incremental consumption will positively influence economic growth. As consumer demand starts to pick up, relevant economic data will also improve.
Furthermore, the childcare subsidy policy will have a positive impact on overall consumer and investment confidence in society. This includes sectors such as real estate, liquor, and related consumer industries that have been relatively sluggish in recent years, which are fundamentally related to the expectation of a continuous decline in population growth. A declining population growth rate suggests that potential market demand may decrease in the future, significantly impacting confidence in various industries. Once birth rates show significant improvement and population growth begins to rebound, it will boost market confidence to some extent, improving expectations for both consumption and investment demand.
【Anchor】From an investment perspective, is the maternal and infant sector worth long-term optimism for investors?
【Guo】The maternal and infant sector may show significant signs of differentiation in the future, leaning more toward a trend of concentration and specialization. The arrival of the childcare subsidy policy will stimulate the fertility demands of some families to a certain extent. If more supporting measures are introduced, including holiday subsidies, education subsidies, and housing subsidies, it is expected to enhance the effectiveness of the childcare subsidy policy. Once the birth rate shows signs of bottoming out and rebounding, the investment logic for many industries will fundamentally change. If market expectations improve, it will have a positive impact on the stock market and the economy.
Therefore, from a long-term perspective, the consumption and investment demand in the maternal and infant sector are gradually improving, and fundamentally, the fundamental market drivers are shifting. However, since there are currently many listed companies involved in the maternal and infant sector, the future development of this sector will mainly trend toward concentration and specialization, leading to noticeable differentiation.
【Anchor】OK, thank you. That's all for this episode. Remember to follow us on YouTube or download our APP. I'm Yunfei Zhang, thanks for watching, and see you next time.
Anchor: Laura Cheung | Edited: Kelly Yang, Laura Cheung, Rachel Liu | Translate: Kato Ip | Proofread: Chris Liu
Related News:
Comment