China to accelerate projects, boost consumption to spur recovery

BEIJING (Reuters) -China will speed up fund injections to expedite project construction and boost domestic consumption, China’s state planner said on Monday, even after the economy showed signs of renewed momentum last month.

The world’s second-biggest economy slowed sharply in the second quarter, dragged down by a deepening property crisis, and slowing exports and imports.

However, it showed surprising resilience in August, with faster-than-expected growth in factory output and retail sales, although the property crisis continues to hang over recovery prospects.

“The economy is at a critical juncture in its recovery, as the foundation of the domestic economic recovery is still weak despite main economic indicators showing positive changes,” said spokeswoman Meng Wei at the National Development and Reform Commission (NDRC).

Shanghai, which lifted a two-month Covid lockdown in June, said it would hand out “consumption vouchers” worth around 100 million yuan ($14.3 million) to residents starting Tuesday, for use in a major shopping district.

The southern island province of Hainan on Monday also said it would issue vouchers, again totalling 100 million yuan, to make consumption the main driver of the recovery.

China’s cabinet has rolled out a raft of measures since late May to bolster an economy ravaged by disruptions caused by government restrictions and lockdowns.

“Stringent COVID restrictions amid the Omicron variant have led to frequent local lockdowns and weighed on China’s economic activity this year,” said Goldman Sachs in a research note.

“We estimate the current level of restrictions is suppressing the level of GDP in China by 4-5%.”

($1 = 7.0190 Chinese yuan renminbi)

(Reporting by Liangping Gao and Ryan Woo; Editing by Kim Coghill, Sam Holmes, Kirsten Donovan)