Experts call for subsidized consumption credit

China should issue new policies to boost consumption with a focus on area of consumer credit as the economy continues to face downturn pressure, experts said Tuesday.

"The pressure to boost the country's economy is huge under the current situation," Zhao Ping, a Beijing-based research director at the Consumption Economics Department under the Chinese Academy of International Trade and Economic Cooperation, told the Global Times.

"With exports and investment both seeing a decline, the exit of previous consumption-stimulating policies has also contributed to a decline in consumption," Zhao noted.

"It is time to issue new policies to boost consumption with a focus on industries such as vehicles and household appliances, which take up a large part of the total consumption, and also on home decoration materials, which saw rapid growth in sales last year," Zhao said.

Interest subsidy should be offered on consumer loans, which reached 4.1 trillion yuan ($645 billion) last year. And besides subsidies on purchases, tax rebates should be applied to consumption of imported goods, she noted.

Zhao's suggestions echo a recent report published by the Economic Information Daily under the Xinhua News Agency.

China may issue new policies to boost consumption this year and the new policies are expected to be more effective and practical, the Economic Information Daily reported Tuesday, citing an unnamed source.

"Currently, the old-for-new home appliance and vehicle subsidy programs have gradually expired, and interest subsidy program to boost credit consumption can fill the policy gap," the source was quoted by the report as saying.

"Supporting credit consumption will become an important means to boost immediate consumption and economic growth," the source said.

"Consumers who purchase vehicles, household appliances and furniture of up to a certain value should be given interest subsidy," the source noted.

At the beginning of the year, Commerce Minister Chen Deming said the ministry will study policies to substitute the old-for-new home appliance and vehicle subsidy programs.

In May, the State Council announced to earmark 26.5 billion yuan to subsidize the consumption of household electrical appliances, 2.2 billion yuan to promote the consumption of energy-saving light bulbs and LED (light-emitting diodes) screens and 6 billion yuan for purchase of vehicles with engine sizes below 1.6 liters.

In June, Shen Danyang, spokesman of the Ministry of Commerce, said the ministry was working with government agencies to roll out measures to boost consumption including continuing the policy to subsidize rural household appliance buyers and offer tax reduction or exemption for commodity circulation area.

Beijing Municipal Commission of Commerce announced in February that it would launch an old-for-new furniture subsidy program on the trial basis, aiming to boost the city's consumption.

"In China, there are further signs that policy stimulus continues to be focused on infrastructure spending and consumption measures," Dariusz Kowalczyk, a senior economist at Hong Kong-based Crédit Agricole CIB, said in a research note sent to the Global Times Tuesday.

"We believe that such measures will succeed in boosting growth, but market impact will be delayed by lack of a major headline announcement," he said.