Chinese cities scramble to issue coupons to boost consumption

▶ Experts predict 5- time ‘ multiplier effect’ to uplift sales

Multiple localities in China have issued coupons and digital red envelops among a variety of benefits, aiming to bolster consumer confidence and encouraging local spending during the upcoming May Day holidays.

Analysts said the issuing of coupons is conducive to promoting short- term spending from April 30 to May 4, creating a “multiplier effect” and helping ramp up consumption in the second quarter.

Tech hub Shenzhen in South China’s Guangdong Province which has just emerged from recent COVID- 19 outbreaks has announced it will issue a total of 500 million yuan ($ 75.55 million) coupons starting from Thursday, one of the largest sums announced by a Chinese city so far.

The issuing of coupons is conducive to lifting short- term consumption, restoring consumer confidence and alleviating pressure on merchants especially those in service focused sectors which have been hit hard by the epidemic, said Cong Yi, professor of the Tianjin University of Finance and Economics.

Compared with giving out cash, consumption coupons will have a certain “multiplier effect” with every 1 yuan generating about 3 to 5 times that amount in large cities such as Shenzhen and Guangzhou, Cong said.

Analyst predicted that brick and mortar retail business, such as sales in supermarkets and restaurants are most likely to reap benefits from the coupons due to a “staying put” policy during the May Day holidays.

The issuing of consumption vouchers will give a boost to the retail and catering industry, as coupons for the purchase of daily necessities will be welcomed for people suffering under the impact of COVID- 19 flare- ups, said Dong Dengxin, director of the Finance and Securities Institute of the Wuhan University of Science and Technology.

In addition to regular coupons, multiple cities including Shenzhen have issued red envelopes in digital yuan.

Digital yuan could be an effective tool to offer targeted help to individuals and smaller businesses hit hard by the pandemic, said Chen Bo, director of the Digital Finance Research Center at the Central University of Finance and Economics.

“One of the features of digital yuan red packets is that they can be allocated to designated groups, scenarios and vendors,” Chen noted.

Chinese officials on Monday called for more support and measures to help affected businesses and boost consumer spending.

This comes after China’s retail sales, a main gauge of consumption, fell 3.5 percent year- on- year in March, the first contraction since August 2020. The State Council issued guidelines on Monday, calling for more efforts to promote the orderly recovery of consumption and to stabilize consumer spending.