Insufficient consumption demand in China, triggered by domestic real estate woes, the changing external environment, the fallout from the Covid-19 pandemic and widened income gaps, must be curbed by decisive countermeasures such as interest rate cuts and the expansion of government bonds to increase expenditure. Otherwise, it will affect personal incomes and the employment rate, hinder enterprises’ profitability and solvency, put pressure on stock and real estate valuations and risk the credit system of financial institutions. Without determined policies, inflation will drop deeper than policy interest rates and the growth of government expenditure will still be slower than nominal GDP. If this weakened demand is not appropriately addressed, it will lower market expectations and dent people’s confidence, as good job opportunities will continue to diminish and salaries will not increase, even with longer working hours.
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