News Center



Home News Center News

Prof. Yao Yang Calls for Cash Allowances for Low-Income Groups

May 31-2022   



To kickstart consumption, the government should give cash allowances to low-income groups, said Prof. Yao Yang, Dean of the NSD, in a recent media interview.

 

Consumption holds the key to jumpstart the Chinese economy, which has been mired in lockdowns, he said. Since the onset of the pandemic, the savings rate has climbed up as people scramble to deal with uncertainties. Prof. Yao has been an staunch advocate of giving the public cash allowances and has recently been echoed by other economists. He agreed with the proposal that each low-income family be given 10,000 yuan, in lieu of the much-circulated advice of 1,000 yuan.

 

The recipients should be required to spend the money on specific categories of products by a certain deadline; as such, spending will soon hit the start button of consumption, he said.

 

As for market entities which have lost their clients during the pandemic, offering loans to them will make them to pile on more debts. Instead, lessons can be learned from other countries which pay for employees’ salaries, he said.

 

Should current pandemic control measures be maintained, the Chinese economy might grow at a rate lower than previous estimates. In April, transportation volume plummeted by 80%, signaling a near standstill of economic activities. If the growth was to hover at 2-3% in the first half of the year, then 8% would be needed in the second half for the economy to reach the targeted 5.5% growth rate - a tough task, said Prof. Yao.

 

On the macro-economic side, the central government has released a gamut of fiscal and monetary policies, but local governments have been much less keen on expanding investments over the last two years. In fact, local government investments have grown by less than 3% annually over the last few years. Some possible reasons might be a lack of good projects and the fear of having to be accountable for over-leveraging.

Prof. Yao Yang Calls for Cash Allowances for Low-Income Groups

May 31-2022   



To kickstart consumption, the government should give cash allowances to low-income groups, said Prof. Yao Yang, Dean of the NSD, in a recent media interview.

 

Consumption holds the key to jumpstart the Chinese economy, which has been mired in lockdowns, he said. Since the onset of the pandemic, the savings rate has climbed up as people scramble to deal with uncertainties. Prof. Yao has been an staunch advocate of giving the public cash allowances and has recently been echoed by other economists. He agreed with the proposal that each low-income family be given 10,000 yuan, in lieu of the much-circulated advice of 1,000 yuan.

 

The recipients should be required to spend the money on specific categories of products by a certain deadline; as such, spending will soon hit the start button of consumption, he said.

 

As for market entities which have lost their clients during the pandemic, offering loans to them will make them to pile on more debts. Instead, lessons can be learned from other countries which pay for employees’ salaries, he said.

 

Should current pandemic control measures be maintained, the Chinese economy might grow at a rate lower than previous estimates. In April, transportation volume plummeted by 80%, signaling a near standstill of economic activities. If the growth was to hover at 2-3% in the first half of the year, then 8% would be needed in the second half for the economy to reach the targeted 5.5% growth rate - a tough task, said Prof. Yao.

 

On the macro-economic side, the central government has released a gamut of fiscal and monetary policies, but local governments have been much less keen on expanding investments over the last two years. In fact, local government investments have grown by less than 3% annually over the last few years. Some possible reasons might be a lack of good projects and the fear of having to be accountable for over-leveraging.