China Adopts New Policies to Boost Investment and Consumption

China seeks to increase investment and consumption through new economic support measures following a lackluster performance last year. Based on estimates, fiscal stimulus maneuvering could be worth approximately USD 7 billion in direct subsidies and tax credits, financed by the central budget. An additional USD 20 billion in soft loans at a rate of less than 2 percent would be added. Together with these measures, there should be incentives to replace non-durable goods with new ones, most likely electric cars. China wants to boost investment to RMB 4.8 trillion (or 609 billion euros) by 2027, a 25% increase from 2023.

This stimulus plan will be especially beneficial to the heavy industrial, agricultural, construction, transportation, education, culture, tourism, and healthcare sectors. Investments in these areas will primarily increase the energy efficiency of domestic production. To maximize technological potential, special measures aimed at promoting research and development will also be directed toward the industrial sector. One of the goals is to boost automation by 10% over the next three years, commencing at 58.6% by the end of 2022.

Additionally, a new action plan has been released to allow foreign investors more access to the Chinese market. Expanding market access, improving China’s business environment, guaranteeing a “level playing field” for foreign investors, innovation, and greater alignment between domestic regulations and the highest international standards in trade and business are the five main focuses of the plan’s 24 measures. As per the action plan, China pledges to decrease the range of industries in which foreign investors face difficulties and to loosen regulations on foreign funding for scientific and technological innovation. The latter procedure will also apply to the healthcare and telecommunications industries, with a focus on promoting investment in novel energy-efficient technologies.

Notable was the announcement that international financial institutions would have greater access to the banking and insurance sectors. Panda bonds and other similar instruments will facilitate easier access for foreign companies and entities to the domestic bond market. Finally, the action plan clearly states that it will facilitate international staff exchanges, support data flow between foreign companies operating in China and their parent companies overseas, and enhance the residency permit situation for foreign nationals.