Stimulating Consumption Value of Vouchers

With the easing of the novel coronavirus outbreak in China and vouchers being broadly used by local governments and merchants to boost consumer spending， some analysts say it would be more effective if combined with an improvement in employment.

The eastern city of Hangzhou announced a plan to issue e-vouchers via Alibabas online payment service Alipay on March 26. By 4 p.m. on March 29， the resulting consumer spending had reached 453 million yuan （$64 million）， 15 times the value of the vouchers given out， with the redeemed government subsidies reaching 28.93 million yuan （$4.1 million）， data from the local commerce bureau showed.

Apart from Hangzhou， other local governments including Nanjing， Jiangsu Province in east China， and Hefei， Anhui Province in east China， have issued vouchers which can be used in restaurants， gymnasiums， bookshops and tourist spots to stimulate consumption hit hard by the novel coronavirus outbreak.

Song Jun， a benefi ciary of the voucher campaign， received a 100-yuan （$14） voucher and spent 200 yuan （$28） in a restaurant soon after， paying half of the total cost himself， Song said in a social media post.

Zhang Yueyou， an associate researcher at Nanjing University， expects the voucher distribution to release the pent-up demand， boost consumer confidence in the short term and shore up the service sector battered by the outbreak.

Compared with the direct cash payments to citizens in the United States and Britain， vouchers could directly stimulate spending， according to a research paper from Everbright Securities， which forecast vouchers could boost overall consumption by 20 percent on average.

But there are doubts if all local governments can afford to offer a heavy dose of voucher stimulus， as the pandemic is taking a toll on governments coffers in different degrees.

Revenues of Chinas central and local governments in the fi rst two months dropped 9.9 percent year on year and their spending also plunged 2.9 percent as social and economic activities halted.

Local governments need to consider how much funding they can afford when rolling out measures to stimulate consumer spending and ensure that the measures can bring real benefi ts to businesses and the public， Ha Zengyou， an offi cial with the National Development and Reform Commission， said.

Being the biggest contributor to Chinas economic growth over the past six years， retail sales are expected to lead the post-pandemic recovery and provide the economy a cushion if the spread of the coronavirus elsewhere deals a heavier blow to the world economy.

In the fi rst two months of this year， Chinas retail sales shrank 20.5 percent year on year， as the country suspended businesses， factory production and transport to contain the virus.

Chinas surveyed unemployment rate in urban areas stood at 6.2 percent in February， up by 1 percentage point from January， according to the National Bureau of Statistics.

Despite business disruptions by the virus， 1.08 million new urban jobs were created in the fi rst two months. Meanwhile， 2.19 million jobless people received 6.1 billion yuan （$860.7 million） in unemployment insurance in the fi rst two months.

As businesses are slowly recovering， analysts stress the need for an orderly resumption of work and production to provide people with a stable income through employment.

Only when employment and income are ensured would people have the ability to spend， said Ming Ming， an analyst with CITIC Securities， noting that measures proposed by the government would help underwrite purchasing power.

A meeting of the Political Bureau of the Communist Party of China Central Committee said on March 27 that impoverished people will be helped to return to their jobs or fi nd employment， opening of malls and markets will be speeded up， and household and public spending will be expanded while maintaining the prevailing trend of new online consumption.

A package of macro policies and measures will also be introduced. The country will appropriately raise the fi scal defi cit ratio， issue special treasury bonds， increase the scale of special bonds for local governments， and guide cuts in lending rates.

As the coronavirus pandemic has sparked panic and quarantine elsewhere across the world， business suspension and factory closures might be a new reality Western economies have to face for several months to come.

A separate report from S&P Global Market Intelligence noted that it could be some time before demand recovers and that the improving situation in China gives a hint of the postcoronavirus consumer landscape.