China explores services subsidy to boost weak domestic demand

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China is studying the inclusion of services in the support program of millions of dollars to stimulate consumption, according to officials and academics, as the second largest economic conflict in the world to increase the chronic local demand.

An official familiar with the matter said that the program, which will seek to stimulate the purchase of services in sectors such as travel, tourism and sports, in the second half of this year if consumption continues to be delayed expectations.

In addition to the current “Trade” program for commodities, such as mobile phones or cars will come.

“There is a serious discussion” about the service support program. They added that if the consumption is not as strong as expected in the first half of 2025, “very possible” services will be included in the trade program.

Officials and academics did not provide a number of the expected size of the program, but this month China has pledged to double the financing of the consumer commodity trade plan this year to 300 billion yuan ($ 41 billion).

For decades, economists have called for a rebalancing its economy to encourage more local demand, a need that has become more severe after the start of the deep real estate sector four years ago.

About 80 global executives, Beijing, visit this week for a year for business and a possible meeting of President Xi Jinping, as they are expected to raise strong dependence in China on exports and investment, rather than consumption and services, for growth.

The Chinese trade surplus reached a record worth one billion dollars last year, and the contractions pressed the competitiveness of its goods, which exacerbates trade tensions with the United States and the European Union as well as with large developing countries.

Beijing has tried to enhance local consumption in recent years through trade plans, but economists have criticized the programs as it helps mostly producers to sell goods, rather than increasing the power of spending for consumers, and thus failed to balance the economy.

“The constant concern about this program was that it was limited to demand forward, not jumping on sustainable consumption,” said Chris Pidor, Vice Director of China Research in Boubbal.

The International Monetary Fund described the China Service Sector as “unpopular”, noting that it represents 50 percent of the value added to the economy last year, compared to about 75 percent for developed countries.

One of the Chinese academics familiar with this issue said that policy makers in Beijing had a positive reaction to the proposals to include services in the consumption support program.

“They said they would consider it,” said academic, who refused to determine his identity because he was not permitted to publicly comment on the official policy.

The academic said that some local governments have already introduced consumption subsidies for cultural and tourism activities, but there is no such program at the national level. They added that decision -making was likely to be slow and would be the introduction of any scheme.

The Ministry of Finance in China did not respond to the request to comment on the subsidy program.

Beijing has been moved in recent months to a more trend towards consumption. Prime Minister Lee Qiang, the second official in China, stressed the domestic demand at the annual meeting of the country’s in the country this month.

The also issued a plan to raise consumption, which included initiatives ranging from a child care support system to providing spring factors to schools.

Consumption was expected to be the subject of discussion among the executives collected in Beijing this week for the annual China Forum for Development, which ended on Monday.

But in one of the signs that consumption has not yet surpassed Beijing’s focus on manufacturing, a table of the FT forum showed that the meeting would start with sessions on “new in fruitful powers”-which is a gentle expression of high-tech production and supply chains.

“Consumption Enhancement” will be discussed at the end of the forum, in one session, according to the business schedule.