At the beginning of this year, China’s economic operations had, on the whole, achieved a stable start. However, in March, unexpected factors such as the omicron epidemic in Changchun and Shanghai – which lasted through the end of May – affected this stability. At that time, including other regions, China’s economic development environment became more complex, severe, and uncertain, and the downward pressure on the economy increased. The economic data in April generally fell as the economy softened under omicron. However, May data showed some recovery; in the manufacturing industries, the PMI for March, April, and May was 49.5, 47.4, and 49.6 respectively.
The Chinese government identified three priorities moving forward: minimize the impact of the epidemic on economic and social development; coordinate development and safety; and strive to achieve the expected goals of economic and social development throughout the year. To meet these priorities, the government released a policy package to stabilize the economy on May 31, 2022, which includes six segments of 33 measures:
Fiscal (seven measures)
Financial (five measures)
Investment and consumption (six measures)
Food and energy security (five measures)
Industrial and supply chains (seven measures)
People's livelihoods (three measures)
The package would spend approximately $1.778 trillion (RMB 12 trillion) within 2022.
The investment and consumption segment, which covers investments in transportation infrastructure and a steady increase in bulk consumption, is meant to stimulate purchases of cars and home appliances. This includes reducing the purchase tax for the internal combustion vehicle and building even more public charging stations for EVs to meet rapidly growing demands. For the energy security segment, projects include wind energy, photovoltaic, hydro power, and ultra-high voltage delivery channels. New energy and infrastructure are organized by types of measures within the package.
At present, the focus of China’s efforts to stabilize investment and promote consumption remains on infrastructure and commodity consumption.
This policy package offers significant opportunities to the construction machinery, automotive, green home appliance, and new energy power generation sectors, and the manufacturing industry will really benefit in the second half of 2022 and near future.
For more information, please contact Fred Qian at fredqian@AMTchina.org.