China has unveiled an extensive “special action plan” aimed at boosting domestic spending to counteract the economic effects of tariffs imposed by the United States under President Donald Trump.
The plan, announced by the official Xinhua news agency, is broad in scope but lacks specific details. It includes measures to increase people’s incomes, establish a childcare subsidy system, and expand a “cash-for-clunkers” program to encourage people to trade in old goods like cars and electronics.
This initiative builds on Premier Li Qiang’s pledge earlier this month during a major political meeting to ensure that China’s economy remains on course for steady growth. He set a growth target of around 5% for this year, which is achievable only through increased domestic spending, as China seeks to avoid relying on exports amid its slowing economy.
China’s economy is weighed down by weak consumer spending, uncertain employment prospects, and a prolonged downturn in the property sector. On the international front, the trade war with the United States continues to add pressure. In retaliation for the U.S. doubling tariffs on Chinese imports to 20%, China recently imposed its own tariffs on U.S. agricultural products.
According to the latest data from the National Bureau of Statistics (NBS), retail sales—a key measure of consumption—rose by 4.0% in the January to February period. This is slightly faster than the 3.7% increase reported in December and met economists’ expectations.
Zichun Huang, an economist at Capital Economics, noted that China’s economy had a solid start to the year, likely driven by fiscal stimulus. However, he warned that, given the ongoing challenges facing the economy, any near-term recovery is unlikely to be sustained for long.
Deflation remains a persistent issue, dampening consumer spending as people anticipate falling prices in the future. This, in turn, hinders consumption, which is crucial for economic growth.
In February, China’s Consumer Price Index (CPI), a key indicator of inflation, fell by 0.7% compared to the same period last year, marking its lowest level in over a year. Meanwhile, industrial production, which includes manufacturing and mining output, expanded by 5.9% in the first two months of the year, slightly ahead of analysts’ expectations.