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China on a shopping coupon spree

While the Chinese government goes on a four-nation shopping spree to boost trade and discourage protectionism, its own economy needs shoppers too, reports Reshma Patil.
Hindustan Times | By Reshma Patil, Beijing
UPDATED ON FEB 27, 2009 12:01 AM IST

This week, a Chinese trade delegation touring Europe left Berlin with 37 procurement deals worth 14 billion dollars. Official media said the Chinese shopping list included engineering equipment, 37,000 BMWs and 27,000 Mercedes cars.

While the government goes on a four-nation shopping spree to boost trade and discourage protectionism, its own economy needs shoppers too. Conventionally, the Chinese are big-time savers not spenders. So local governments are handing out millions of yuan worth of shopping and tourism coupons since the spring festival in January.

The government of the southern Guangdong province, known as the world’s workshop, is the latest to hand out coupons. The provincial government will pay for a 13 per cent discount on airfare and hotels with two lakh travel coupons to encourage farmers to go on a six-day tour of five cities.

Media reports from the manufacturing hub of Nanjing, a former China capital by the Yangtze, say its government will distribute 100-yuan coupons to two lakh households to spend at 37 local sightseeing spots from March to June.

Scenic Hangzhou, the capital of east Zhejiang province and home to India’s Infosys, distributed 100 million yuan worth of shopping coupons to low-income families before the spring festival. Hangzhou plans to issue more coupons in April. China Central Television said the coupons are for people to ‘have a good time and spend money’.

But the artificially created demand will not make a long-term impact on the domestic economy as most Chinese will go back to saving once the coupons are used and the good times are over.

And not everyone is celebrating the compulsory consumption. The Hangzhou government has told civil servants to expect 5 to 10 per cent of their salary in shopping coupons. “The Party chief and mayor will take the lead and all civil servants will follow,” party chief Wang Guoping was quoted saying in a media report earlier this month. “By doing this, we are showing firms that we are fighting the difficulties with them”.

Can the government decide how you spend part of your salary? The legality of the plan has sparked debates on Chinese blogs. Even the official English newspaper, the China Daily, has quoted a young official grumbling about low pay. “Combined with the bad economy, being paid in coupons will make the situation even worse’’.

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