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Economy: Why Does China Give Out Consumption Vouchers?

To help their people survive the hardship due to the widespread coronavirus pandemic, major countries have developed economic stimulus packages and provided money to their people. However, China did not do that this time. Beijing is betting that the consumption vouchers that it pushed the local governments to hand out will build up consumption in China.

These vouchers, normally will expire within a certain period, e.g. 30 days, and are limited to consumption in the local area.

Stock Times reported that Li Xunlei, Chief Economist at Zhongtai Securities, a large security holding company under the Shandong Provincial government, said that, in 2009, when handling the secondary mortgage crisis in China, Hanzhou City, Zhejiang Province offered its residents 1 billion yuan (US $140 million) in consumption vouchers, and the city’s total annual consumption increased by 15.5 billion yuan. This showed a 15 times leverage from the consumption voucher.

Li is against the government spending so much money on infrastructure development, which does not directly stimulate consumption, and also creates excess housing supply and future problems.

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Source: Stock Times, April 1, 2020