China to give cash handouts to poor in rare use of aid

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• China plans to provide one-off cash handouts to those in extreme poverty ahead of the National Day holiday, signalling a rare use of direct aid.
• The government aims to stimulate the economy amid rising unemployment and a struggling property sector.

OUR TAKE
China has announced a new plan to provide one-off cash payments to individuals in extreme poverty, which marks a big change in its approach to direct aid. This comes just a day after the government announced a new plan to boost the economy. They haven’t said how much the subsidies will be, but it shows they’re worried about the economy and want to help people spend more. This is a new way of helping people, but it shows the government is trying to help the people who need it most.
–Heidi Luo, BTW reporter

What happened

China will distribute one-off cash handouts to people living in extreme poverty before October 1 as part of a wider initiative to tackle economic challenges.

The announcement was made by the Ministry of Finance and the Ministry of Civil Affairs, which said the subsidies would reach disadvantaged groups, including orphans, before the upcoming National Day holiday.

Local authorities have been instructed to ensure that these funds are delivered promptly to demonstrate the government’s commitment to helping those in need.

While the exact amount of the cash handouts remains undisclosed, the rapid implementation of this programme represents a departure from the government’s traditional reluctance to offer direct welfare support, as underscored by President Xi Jinping’s stance against welfarism.

This announcement follows a series of monetary easing measures aimed at countering an economic slowdown, including significant interest rate cuts.

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Why it’s important

The introduction of cash handouts is seen as a response to the growing economic pressures facing the country, particularly as consumer spending has been hit by a sluggish housing market and rising unemployment rates.

Economists have been calling for direct fiscal measures to stimulate consumption, and this initiative may help address these concerns. According to Neo Wang of Evercore ISI, the housing subsidy illustrates Xi’s focus on the most disadvantaged groups as China approaches the 75th anniversary of the Communist Party.

The cash injection is also aimed at boosting consumer confidence during the National Day holiday, a period known for high travel and spending. The government’s financial support budget for this year is around $22 billion, aimed at helping people living in extreme poverty and other vulnerable groups.

With the central bank having already implemented large monetary stimulus measures, all eyes will be on the Ministry of Finance to see if further fiscal intervention will follow in the coming days.