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Beijing plans to offer residents consumption vouchers to stimulate sluggish spending, joining a chorus of local governments facing plummeting consumer confidence in the fallout of Covid-19 lockdowns.

The municipal government will hand out 100 million ($14.9 million) in vouchers exclusively for eating out, as well as an unspecified number of suburb touring vouchers, according to its lateststimulus policies,published this week.

One yuan in vouchers will likely generate about 3.5 yuan in additional spending, Peking University professor Shen Qiaowei said on a webinar held by its Guanghua School of Management last week, citing a joint research study by the university and financial services firm Ant Group Co. Ltd.

Since April, authorities in over 20 provincial-level regions have offered vouchers or coupons worth about 7.8 billion yuan as one form of their demand-side stimulus, Peng Wensheng, chief economist of brokerage China International Capital Corp. Ltd., wrote in a Friday opinion piece published by Caixin.

Lockdowns and travel restrictions in Beijing have devastated the Chinese capitaFs economy over the past two months. In May, the cit/s retail sales dropped 25.7% year-on-year while industrial added value plunged 39.6%. By comparison, the country's retail sales slid 6.7% year-on-year that month.

In the first two weeks of May when restaurants in the capital were suddenly banned from welcoming patrons, revenues across the sector were sliced in half, Caixin previously reported.

But as long as domestic Covid outbreaks remain muted, Peng expects a revival in retail sales, with as 7% year-on-year national growth in the second half, as stimulus policies would help boost spending and employment, and potentially release some pent-up consumer demand.

Some analysts have said such vouchers won't be of much help to low-income families because the initiative was designed primarily to support businesses. They said vouchers cannot offset the drop in income suffered by millions of people furloughed or unable to work during outbreaks.

Unlike some countries, direct cash transfers, the coupons that Chinese cities have been offering are for discounts that require consumers to spend additional money in order to use them.

The Beijing government also said it will subsidize some landlords and online service platforms which exempted fees or rents for restaurants and stores over the past two months of neighborhood lockdowns.

Other measures in the stimulus package include subsidizing buyers of new- energy vehicles for up to 10,000 yuan each, if certain criteria are met, such as having a Beying driver*s license.

Contact reporter Guo Yingzhe (yingzheguo@caixin.com) and editor Jonathan Breen (jonathanbreen@caixin.com)

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Resource:Beijing Launches Consumption Vouchers Scheme to Stimulate Waning Spending

https://www.caixinglobal.com/2022-07-08/beijing-launches-consumption-vouchers-scheme-to-stimulate-waning-spending-101910417.html