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China's central government is pushing local governments to find ways to encourage consumer spending in the wake of the coronavirus pandemic as the country starts to lessen its lockdown, per the South China Morning Post.
Local governments are using tactics like prepaid vouchers and coupons that can be put toward purchases from certain product categories, while the central government does not currently plan to directly send funds to citizens. And Chinese firms including Alipay and JD.com are introducing their own discounts and coupons as well to boost spending on their platforms.
Revitalizing consumer spending is an important task for China and markets around the world, but it remains to be seen what tactics will be the most effective at doing so.
- China has seen its retail sales plummet in the wake of the coronavirus pandemic, and other countries will likely face similar circumstances. The country's retail sales dropped 20.5% in January and February, according to the Post, which surely damaged the performance of the country's economy, commerce platforms, and merchants. Now that China is easing its restrictions, the government and merchants have the chance to encourage consumers to visit stores and other physical merchants and make more purchases - but consumers may be slow to do so if they struggled financially because of the quarantine and if they're still concerned about getting sick. When other countries start to alleviate their own restrictions, they'll probably have to deal with these same inhibitors of consumer spending, since financial losses and anxieties about the pandemic could be a global problem.
- While China is focusing on promotions, some markets are sending funds directly to consumers to potentially drive consumer spending. The US Senate passed a bill that would give many consumers access to additional funds, and Hong Kong is taking similar action. Access to funds could lead consumers to spend more, but it's possible they'll choose to save any money that doesn't go toward paying bills or buying essentials. In comparison, China's promotions push consumers to directly make purchases. It's unclear if these initiatives, or others like covering a percentage of employee salaries if businesses don't lay them off, will successfully drive consumer spending in the future, but it's paramount that governments and businesses examine which options prove most effective in order to quickly bolster retail sales and spending when the pandemic subsides.
Payments companies have the chance to help facilitate the distribution of funds and vouchers to consumers, which could boost their volume, too. The US Senate's bill would lead to direct payments, but some local governments in China are sending citizens vouchers through WeChat Wallet, illustrating the role payments firms can play.
Payments companies that successfully partner with governments can be a part of getting funds and vouchers to consumers, and because those offerings may be held in their digital wallets, prepaid cards, or other payment instruments, the payments firms may be able to garner greater payment volume in the process.
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