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KEY STAT | Local governments to stimulate consumption in China via digital coupons

Cities across the country have started to encourage public activities as the Chinese government tries to revive a halted economy.

Different levels of governments across China—from provincial to municipal— have started giving out digital coupons to local citizens since early March, in a bid to stimulate consumption in the first quarter of 2020 as the country’s economy is still reeling under the effects of the coronavirus outbreak.

As of the end of February, roughly USD 570 million worth of coupons, sponsored by local governments, have been distributed to consumers, vendors, and business operators to help boost sales.

A large part of the coupons was given through third-party payment services like Alipay and WeChat pay. Depending on local policies, customers would see parts, if not all, of their consumption bills waived when using digital payment methods at certain restaurants, tourist attractions, theaters, book stores, and retail shops.

In Hangzhou, a southern city near Shanghai, home of internet conglomerate Alibaba, local residents have been given coupons worth of total of RMB 1.68 billion (USD 240 million) on March 27. In the second round of vouchers Hangzhou issued in early April, the average amount per coupon is raised from the previous RMB 50 to 100 (USD 7.08 to 11.7).

As of April 3, Hangzhou government has redeemed RMB 94 million (USD 13 million) among the planned amount for its citizens, driving up a total consumption of RMB 1.25 billion (USD 180 million).

Some governments have also chosen to distribute vouchers directly through e-commerce platforms like Taobao, JD.com, and Sunning.com.

Zhongtai Securities predicted in its latest report acquired by KrASIA that these coupon policies, which have been implemented in more than 20 provinces so far, would drive up China’s consumption levels, but only in the short term, as the time limit and total amount of these coupons make it hard to bring in long-term effects.

In 2019, consumption contributed to more than half of China’s economic growth. From early 2020, the coronavirus health crisis has forced business activities suspensions in many sectors, resulting in a sharp decline in sales, investments, and productions, as data from the National Bureau of Statistics show.