China suddenly distributed money to people, what’s going on?

The Chinese government is about to distribute cash subsidies to vulnerable groups. Previously, experts had called on China to take more measures to boost sluggish consumption.

China announced that it will provide cash support to the poor before the National Day on October 1. This announcement came just days after the People’s Bank of China (PBOC) announced a series of measures to stimulate the world’s second largest economy.

September 25, Chinese state television CCTV reported that the Ministry of Finance and the Ministry of Home Affairs will give subsidies to the poor, orphans, and people in difficult circumstances, demonstrating the government’s concern for those in difficulty.

The value of this grant is not disclosed. However, the money will be distributed before October 1, when China begins its week-long National Day holiday.

Beijing requires financial and social agencies to prioritize the implementation of this initiative, ensuring timely implementation of subsidies. At the same time, Xinhua also reported that the government has directed the provision of some social security benefits to university graduates who have not found a job after 2 years of graduation.

The value of this subsidy is not disclosed (Photo: AFP).

PBOC has also just announced monetary easing and many real estate support policies to revive the economy. With China’s important role in the region, PBOC’s move received great attention from Asian market observers.

Mr. Pan Gongsheng, Governor of PBOC, said he would reduce the required reserve ratio for banks by 50 basis points (0.5%). Interest rates on home loans also decreased by an average of 0.5%.

This will help ease the burden on households, but may cause concerns about bank profits. Some other types of savings and loan interest rates will also be adjusted in the near future. The PBOC Governor said they are still open to the possibility of further loosening policy, including lowering the required reserve ratio this year.

Mr. Huang Yiping, a member of the PBOC’s monetary policy committee, also called on the government to increase spending to overcome sluggish consumption. He argued that direct payments to households would boost spending, while an excessive focus on fiscal policy could stifle the economy.

Recently, China’s economic growth has been slower than expected, due to a prolonged real estate crisis and consumer concerns about employment. Economic data in August did not meet forecasts, prompting officials to be urged to launch more stimulus policies.

This year, Beijing targets economic growth of around 5%. However, many major financial institutions in the world such as Goldman Sachs, Nomura, UBS, Bank of America… recently lowered the country’s GDP forecast to 4.6-4.8%.

“These policies were introduced a bit late, but it’s better than nothing. When real interest rates are high, consumer confidence is weak and the real estate market has not revived, China needs to lower interest rates,” Mr. Gary Ng , senior economist at financial company Natixis, commented with AP.