Economists urge Chinese local govts to target consumption to drive growth
Liu Qiao, Dean of the Guanghua School of Management at Peking University, told a media event on Thursday that certain provinces could look at consumption growth or the increase of household disposable income to drive their economies.
"I think this would send a message. China needs to have a different growth approach, and it's time to give it a try," said Liu, who is also policy adviser to Beijing.
Local governments have long used infrastructure investment and land sales to grow their economies, but both now face constraints.
Commerce minister Wang Wentao said on Friday that China faces a complex situation during the next five years.
"We will roll out targeted measures as the situation evolves, to further spur the momentum of goods consumption and release the potential of services consumption," he said at a press conference.
Wang estimated China's annual retail sales would surpass 50 trillion yuan ($6.97 trillion) by the end of 2025.
Government advisers have been stepping up calls to make the household sector's contribution to the economy a priority in Beijing's 2026-2030 five-year plan. Top leaders are currently gathering proposals and the plan is expected to be approved by parliament in March.
The world's second-biggest economy grew 5.3% in the first half of the year despite concerns about sweeping U.S. tariffs. But economists are worried about deepening deflationary pressure.
"Deflationary pressure is the biggest concern of the Chinese economy and China's policy in the short term," said Yan Se, deputy director of the Economic Policy Research Institute at Peking University.
Yan said that while monetary policy could offer a quick solution, the key was to improve people's welfare.
"Why don't we raise the salary? Why don't we raise the unemployment insurance? That will help not only to fight the deflationary pressures, but also help the Chinese economy to transition from a traditional manufacturing sector driven growth into a new quality productive force driven economic growth."
($1 = 7.1772 Chinese yuan renminbi)
Hashtags
Try Our AI Features
Explore what Daily8 AI can do for you:
Comments
No comments yet...
Related Articles
Reuters
23 minutes ago
- Reuters
Exclusive: Cadence nears deal to pay over $100 million to US for China sales, sources say
July 28 (Reuters) - Cadence Design (CDNS.O), opens new tab is expected to pay over $100 million to the U.S. government as part of a deal to resolve an investigation into sales of its chip design products to a Chinese military university believed to be involved in simulating nuclear explosions, according to two people familiar with the matter. Cadence is accused of illegally selling chip design technology to front companies representing China's National University of Defense Technology, the sources said. NUDT's supercomputers are thought to support nuclear explosive simulation and military simulation activities, according to U.S. Commerce Department notices restricting shipments to the university. San Jose, California-based Cadence, which said earlier this year it began settlement discussions with the U.S. over sales to China in December, did not immediately respond to a request for comment, nor did NUDT. The Justice Department declined immediate comment. The Commerce Department did not immediately respond to a request for comment. The potential deal, which comes as the U.S. and China meet for new trade talks, shows the U.S. is still willing to enforce U.S. export controls on China, even as it relaxes some of the restrictions as part of negotiations. The sources said the deal is not finalized. NUDT was put on the Commerce Department's restricted trade list in 2015 to keep it from using U.S. technology to power its supercomputers, according to department postings. Other aliases and locations were added to the university's listing in 2019 and 2022, including Hunan Guofang Keji University, Central South CAD Center, and CSCC. The U.S. investigation into Cadence, which began more than four years ago, involves 'historical sales by Cadence to customers in China,' according to a company filing. Cadence received a subpoena from the U.S. Commerce Department in February 2021, demanding records related to certain customers in China. A related November 2023 subpoena followed from the Justice Department over the company's business activity in China. Cadence sold its EDA technology to NUDT through the CSCC or Central South CAD Center alias about 50 times between 2015 and 2020, according to one source familiar with the probe. Chip developer Tianjin Phytium Information Technology, which traces its roots to NUDT, also has been tied to Cadence sales for the university, another source said. Phytium was added to the restricted trade list in 2021. It did not immediately respond to a request for comment. Several employees at a Chinese subsidiary of Cadence were terminated over the sales, one of the sources said. Entities are placed on the restricted trade list, formally known as the entity list, for activities deemed contrary to U.S. national security or foreign policy interests. U.S. companies are not allowed to ship goods and technology to them without licenses from the Commerce Department, which are generally denied. Cadence will hold a call about its second-quarter financial results at 2 p.m. Pacific Time (2100 GMT) on Monday. Cadence, whose customers include major semiconductor manufacturers and companies such as Nvidia and Qualcomm, is known for its electronic computer-aided design software. Electronic design automation (EDA) tools are key to designing chips and verifying that they are bug-free. NUDT has developed chips to power university supercomputers, including Tianhe-2, once touted as the world's best supercomputer, which the U.S. believes has been used in research on or the development of nuclear explosive devices. Twelve percent of Cadence's revenue came from China last year, down from 17% in 2023, amid regulatory developments and geopolitical tensions.
Reuters
an hour ago
- Reuters
Stocks dip, retreating from record highs hit after EU trade deal
NEW YORK, July 28 (Reuters) - U.S. stocks slipped on Monday after the S&P 500 and the Nasdaq edged up to fresh intraday records, as investors assessed the U.S.-EU trade pact and braced for a week of major market catalysts. U.S. President Donald Trump and European Commission President Ursula von der Leyen unveiled a trade framework on Sunday, slashing EU import tariffs to 15% - half the previously threatened rate that was scheduled to take effect on August 1. Still, France denounced the deal as a "submission." The deal is the latest in a string of announcements in recent days on trade agreements with countries such as Japan and Indonesia. Top U.S. and Chinese economic officials resumed talks in Stockholm to resolve longstanding economic disputes at the crux of a trade war between the world's two largest economies. "It's feel-good in the sense that it doesn't represent Armageddon, if the draconian tariffs went into place," said Scott Welch, chief investment officer at Certuity in Potomac, Maryland. "But it's much too soon to pass judgment on the long-term effects on how that will play out. It's better than the alternative for sure, and so I hope they continue." The Dow Jones Industrial Average (.DJI), opens new tab fell 128.16 points, or 0.29%, to 44,773.76, the S&P 500 (.SPX), opens new tab lost 8.59 points, or 0.14%, to 6,380.05 and the Nasdaq Composite (.IXIC), opens new tab gained 33.74 points, or 0.16%, to 21,141.93. While the moves on Wall Street were modest, the S&P 500 and Nasdaq both managed to climb to intraday records. Aside from the trade announcement, investors were awaiting a policy announcement from the Federal Reserve on Wednesday. The central bank is widely expected to keep U.S. rates unchanged even as the White House has ramped up pressure on Fed Chair Jerome Powell to lower borrowing costs. Also on deck this week were a slew of corporate earnings, including results from heavyweights Meta (META.O), opens new tab, Microsoft (MSFT.O), opens new tab, Amazon (AMZN.O), opens new tab and Apple (AAPL.O), opens new tab, which could sway broader investor sentiment in either direction. Along with the Fed meeting and earnings, a number of economic indicators are scheduled to be released this week, including the Personal Consumption Expenditure report (PCE) - the Fed's preferred inflation measure - and the government payrolls report to gauge how tariffs may have affected consumer prices and the labor market. Nike (NKE.N), opens new tab climbed 3.8% after J.P. Morgan upgraded the stock to "overweight" from "neutral" and said investors should "just buy it". Declining issues outnumbered advancers by a 1.94-to-1 ratio on the NYSE, and by a 1.47-to-1 ratio on the Nasdaq. The S&P 500 posted 26 new 52-week highs and three new lows, while the Nasdaq Composite recorded 62 new highs and 45 new lows.
Daily Mail
an hour ago
- Daily Mail
Porsche warns thousands will lose jobs with EV demand 'hitting hard'
As well as cutting 1,900 jobs in Germany by the end of the decade, Porsche will start negotiations with IG Metall trade union on additional reductions in costs in the second half of this year, with the aim to bolster profitability in the coming years. In the note to employees, CEO Oliver Blume cautioned that the German marque's business model, that was once the envy of the industry due to its leading profit margins, 'no longer works in its current form'. He blamed the global EV sales slumps, the introduction of Trump tariffs - which in recent days have been renegotiated with the EU - and plunging demand in China. Porsche has already scaled back its original projection to reach an 80 per cent share of EV sales by 2030 in a change in places announced this time last year. A Porsche spokesperson told This is Money: 'Our company is currently navigating significant global challenges. 'The fact that we are able to report the figures that we are reporting at the moment is largely thanks to the substantial investments we have made in previous years. 'We have introduced a new and strong product portfolio.' Blume told his employees in Germany that 'business conditions have deteriorated massively within a short period of time'. Porsche's global sales declined by three per cent in 2024, with profit margins now forecast for between 10 and 12 this year, below the long-term target of 20 per cent. By the end of 2025, Porsche will lose the final current-generation Boxster and Cayman, with electric replacements not arriving before 2026. The new Macan EV crossover has seen a strong start to sales, with 60 per cent of sales of the Macan in the first half of the year being electric. Globally Macan sales have improved overall by 15 per cent. However, the Taycan - Porsche's first electric model - saw a 49 per cent decline in sales in 2024 and dropped another six per cent in the first half of 2025. A string of recalls for the flagship EV hasn't helped Porsche's cause. The German brand will therefore be hoping that the Cayenne EV will inject new sales. Any slowdown of EV sales hurts the investments already made into models like the Macan. 'On the one hand we need EVs to fulfil regional CO2 regulations,' Blume wrote, 'but on the other the profit margins are far below those of our combustion engine cars'. Porsche is also battling issues in the Chinese market, particularly with price wars for EVs. The Stuttgart brand saw an overall sales decline in China of 28 per cent year-on-year, which was attributed to 'the continuing challenging economic situation in this region'. It marks the lowest sales level for Porsche in the region for 11 years. North America is also causing the luxury car maker issues, despite being its largest market with price hikes eating into potential growth there. Demand is strong but the combination of tariffs, which have just been confirmed at 15 per cent for European models, and a sharp decline in the US dollar versus the Euro has left Porsche 'under enormous financial pressure' there 'despite a delivery record in the first year,' according to Blume. The perfect storm of all three has seen one of the world's most valuable car makers lose 29 per cent of its share price so far this year. 'All of this is hitting us hard — harder than many other car manufacturers,' Blume said. As a result the job losses announced for 2029 will see employees encouraged to take voluntary leave by accepting early retirement or severance packages, and Porsche will take a 'restrictive approach' to hiring. Porsche commented: 'We have revised our product strategy to reflect the evolving demands of global markets and the slower-than-expected ramp-up of electromobility. 'Our portfolio is now more flexible and features compelling new models for the years ahead. 'We are investing heavily. Our cars are and will remain the beating heart of our company. 'Given the altered external conditions, we must redevelop our business model to be more flexible, regionally attuned and responsive. 'At the same time, we are building on our proven strengths.'
