With the latest COVID-19 resurgences abating and a weeks-long shopping festival just beginning, the Chinese government is handing out billions of yuan in shopping vouchers and subsidies to shore up domestic consumption.

 

In one of the latest such moves, the central city of Zhengzhou, capital of Henan Province, announced to issue vouchers worth 240 million yuan (about 36 million U.S. dollars) from late May to August to encourage local spending.

 

Meanwhile, south China's economic powerhouse of Shenzhen began distributing the third batch of its 400 million yuan shopping vouchers over the weekend, which could be spent on deals for the June 18 shopping festival held by the Chinese e-commerce giant JD.com.

 

The massive voucher giveaway came at a time when the Omicron outbreak weighed heavily on China's domestic consumption, particularly the sales of non-daily necessities and the catering sector, in the first four months of 2022.

 

Retail sales of consumer goods, a significant indicator of China's consumption strength, went down 0.2 percent year on year in the January-April period, official data showed.

 

Shopping vouchers proved to be a powerful leverage to boost spending when the COVID-19 epidemic hit the country in 2020. The 500 million yuan worth of vouchers issued by the local government in Wuhan, the hardest-hit Chinese city by the epidemic, stimulated consumption of more than 5 billion yuan.

 

"Shopping vouchers spur consumption instantly," said Pan Helin, a researcher at Zhejiang University, noting that with certain spending rules in place, vouchers can drive up demand and amplify the effect of fiscal funds.

 

A 2020 Peking University study showed that in Hangzhou, capital of east China's Zhejiang Province, every 1 yuan worth of government voucher issued can generate 3.5 yuan of extra spending, while in less developed regions like Guangxi Zhuang Autonomous Region, the extra amount could reach up to 7.7 yuan.

 

Voucher distribution mainly targets large purchases like automobiles, home appliances and furniture, as well as epidemic-hit sectors such as catering, hospitality and cultural activities. In Shanghai, the local government has offered a 10,000-yuan subsidy to consumers who replace old cars with electric ones.

 

Xu Yongjun, general manager of an automobile dealer in Zhejiang's Tongxiang City, said his store witnessed a nearly 40 percent jump in sales after the local government issued 8 million yuan of auto vouchers.

 

"The pent-up consumption will be gradually released with the containment of the epidemic and production and people's lives returning to normal," said Fu Linghui, a spokesperson with the National Bureau of Statistics.

 

Zhong Zhengsheng, an economist with Pingan Securities, said that he anticipates the distribution of more vouchers in more cities to further facilitate consumption recovery.

 

Zhong also emphasized efforts to help market entities tide over difficulties, which would boost employment and in turn increase people's willingness and capabilities to spend.

 

China's commerce ministry pledged last month to promote consumption by upgrading traditional consumption, speeding up the development of new consumption patterns and improving consumption platforms, so as to enhance the catalytic role of consumption in economic circulation.

 

The impact of the virus on consumption is "temporary" as the strong resilience, great potential and sound long-term development fundamentals of China's consumption remain unchanged, the ministry's spokesperson Shu Jueting has said.