The State Council published a Special Action Plan on March 16, outlining the broad approach the government is adopting to boost consumption, covering comprehensive aspects from the demand side.
The highlighted categories include: 1) Allocating RMB 300 billion for a consumer goods trade-in program in 2025, doubling from 2024. 2) Developing childcare subsidies. 3) Promoting service consumption through cultural, sports, and tourism activities. 4) Supporting IP brand development, such as animation, games, and e-sports.
We have yet to see a critical rebound in overall consumption, but there are signs of bottoming out from late 2024 with gradual policy support kicking in. China’s retail sales year-on-year growth in January-February improved to 4% (from 3%/3.7% year-on-year through November/December). If policies execute well, we could see upside potential from both earnings revisions and further valuation re-rating.
International policy and tariffs remain unfavorable, but the wealth effect from the rising China stock market (MSCI China Index gained 19% through March 24, 2025) and stabilizing property markets (price decline in China’s resale housing market has slowed, and new home prices have picked up in recent months) shall boost consumer confidence further.
The message is not new, but the direction of China’s policies implies that domestic consumption is receiving greater attention from policymakers, supporting the Chinese economy’s recovery in the long term.
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