How can China boost consumption?

China's new policies may give consumption a cyclical boost, even if long-term gains require more serious reforms

Empty shopping Cart on the Chinese Yuan background consumption concept
(Image credit: Getty Images)

It’s often claimed that China’s leaders take a long view, unlike the short-term thinking that prevails in Western economies. Looking at the markets, we might doubt how well that’s working. Late last month, the government abruptly unveiled a series of schemes aimed at supporting consumption and housing, bailing out indebted local governments and banks, and boosting stocks. The CSI 300 index rallied 32% in two weeks, then fell 7% – the biggest one-day drop since 2020 – when some details didn’t meet expectations.

Pessimists may see this as part of a pattern that’s been evident in China over the last few years: exceedingly rapid pivots that keep wrong-footing markets and leave them struggling for long-term direction. Take, for example, the sudden reopening from zero-Covid policies in early 2023, after giving every sign that progress would be very slow. Or the abrupt crackdowns on various sectors from education (virtually overnight) to tech (more telegraphed, but also longer and more severe than expected) to property (understandable and overdue, but the full consequences seemingly weren’t appreciated). In general, the consistency of policymaking has become much worse over the past few years. It’s worth keeping that in mind when considering whether this is a turning point.

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Cris Sholto Heaton

Cris Sholto Heaton is an investment analyst and writer who has been contributing to MoneyWeek since 2006 and was managing editor of the magazine between 2016 and 2018. He is especially interested in international investing, believing many investors still focus too much on their home markets and that it pays to take advantage of all the opportunities the world offers. He often writes about Asian equities, international income and global asset allocation.

Cris began his career in financial services consultancy at PwC and Lane Clark & Peacock, before an abrupt change of direction into oil, gas and energy at Petroleum Economist and Platts and subsequently into investment research and writing. In addition to his articles for MoneyWeek, he also works with a number of asset managers, consultancies and financial information providers.

He holds the Chartered Financial Analyst designation and the Investment Management Certificate, as well as degrees in finance and mathematics. He has also studied acting, film-making and photography, and strongly suspects that an awareness of what makes a compelling story is just as important for understanding markets as any amount of qualifications.