China has launched a year-long plan to offer interest subsidies for personal consumer loans as part of Beijing’s broader efforts to unlock household spending power and shore up domestic demand.
Individuals who take out consumer loans for purchases – including single transactions below 50,000 yuan (US$6,958) and higher amounts for purchases in key sectors such as cars and education – will have part of their interest costs covered by the government, according to the plan released on Tuesday by the Ministry of Finance, the People’s Bank of China and the National Financial Regulatory Administration.
The authorities said the plan aimed to “better leverage fiscal funds to support and guide consumption, lower the cost of consumer credit for households, and help unlock their spending potential”.
Vice-Minister of Finance Liao Min told a news conference in Beijing on Wednesday that the subsidy plan would see “more credit funds channelled precisely into the consumption sector and … while ensuring and improving people’s livelihoods, boost consumption to facilitate economic circulation”.
Liao added that his ministry would work with other departments to ensure the policy played its intended role of “supporting domestic consumption to become the primary driving force of our national economy”.
The plan will subsidise one percentage point of the annual interest on loans, capped at half of the contracted loan interest rate. The central government will cover 90 per cent of the subsidy cost, with provincial governments responsible for the remaining 10 per cent.
It will run from September 1 until the end of August next year, and the authorities said they might consider extending or expanding it after assessing its effectiveness.
