Financial measures to support consumption

China is expected to enhance the multi-tier financial services system to support consumption, by better coordinating financial resources and guiding financial institutions to enhance services from both the supply and demand sides, according to experts.

Such efforts are aimed at meeting the diverse financing needs of both consumers and business entities, thereby expanding the supply of high-quality goods and services to unleash the growth potential of domestic consumption, they added.

Their remarks followed the issuance of a guideline by the People's Bank of China, along with five other government departments on Tuesday, including the Ministry of Finance and the Ministry of Commerce.

The guideline outlines 19 targeted measures, including the launch of a 500 billion yuan ($69.73 billion) central bank lending facility to support consumption in services and elderly care.

It also encourages high-quality enterprises across the consumption industry chain to raise funds through IPOs and supports the development of innovative financial products tailored to household wealth management needs and calls for strengthened regulation of investment and wealth management services to help increase residents' property-based incomes.

These efforts coincide with a greater role for consumption in driving China's economic momentum, experts said.

In 2024, final consumption contributed 44.5 percent to China's economic growth, surpassing investment and exports, and drove GDP up by 2.2 percentage points, according to data from the National Bureau of Statistics.

"Consumption is the ultimate goal and driving force of production," said Dong Ximiao, chief researcher at Merchants Union Consumer Finance Co Ltd.

He said that boosting consumption will further strengthen the internal momentum of economic growth, improve the coordination between domestic and external demand and enhance the resilience and adaptability of China's economy amid global uncertainties.

The guideline also calls for improving the internal organizational structures of banking institutions and supporting eligible companies in service sectors such as culture, tourism and education to issue bonds.

"This initiative will help such companies improve their service capabilities, enhance the professional service capacity of financial institutions, and steadily expand the supply of services and financial products related to consumption," Dong added.

Moreover, supporting qualified financial institutions in issuing financial bonds, as stated in the guideline, is expected to further broaden funding channels, lower financing costs and enhance the supply capacity of consumer credit, he said.

"By strengthening financial services from both the supply and demand sides, the guideline will help improve consumer purchasing power, increase the quantity and quality of consumption supply and promote a more efficient demand-supply cycle," said Lou Feipeng, a researcher at Postal Savings Bank of China.

He added that while addressing short-term issues such as boosting confidence and purchasing capacity, it is also essential to consider long-term goals by encouraging consumption upgrades, achieving a balance between short and long-term development.

The guideline sends a clear signal to guide the reallocation of market resources, bringing tangible benefits to consumers and providing sustained support for consumption growth and upgrading, said Zhou Mi, a researcher at the Chinese Academy of International Trade and Economic Cooperation.

He added that it also plays a vital role in shaping a well-structured and diversified financial support system for consumption.

"In the future, China's consumer finance ecosystem will likely see the participation of financial institutions of different sizes and types," said Lou, adding that each institution will leverage its strengths to provide differentiated financial services based on consumer profiles.

The variety of financial products will expand and online-offline channels will be better integrated into consumption scenarios to deliver higher-quality services to residents, Lou said.