Xi’s China makes a safe space for consumers

Emerging from nearly a year of battling an economy dragged down by Covid-19 and a rickety financial system, Beijing is realising what the most important collateral damage has been: consumers. Without their wallets and balance sheets, China’s economic blueprint for the next five years won’t work.
That explains why authorities have been talking up consumer protection, household leverage and the risks of fintech lenders. At a State Council meeting, boosting consumption —from autos and services to home decoration — topped the agenda. Separately, the banking and insurance regulator pointed to major problems that it’s targeting and would investigate. Among them are high interest fees and problems with online tech platforms, insurance sales and complex wealth management products. Household balance sheets are increasingly indebted, while creditworthiness is weakening.
The focus on consumers is understandable. Ultimately, any percentage of some 1.4 billion people who feel poorer or have lost money could undermine the social stability so highly prioritised by the government. Without them, the recovery and future goals will be derailed. The growth strategy unveiled in the new five-year plan depends partly on generating consumer demand. Currently, Beijing has been able only to boost supply.
In protecting its hundreds of millions of households, the government wants buyers to know their rights and to empower them – or at least to make them feel that way. It’s a theme taking hold globally. The Group of 20 leaders’ declaration last weekend touched on the subject, while the European Commission has launched a new consumer agenda for citizens to “play an active role in the green and digital transition.”
In China, courts are hearing more cases that involve complaints over online shopping for food, electronics and healthcare products. Beijing has a draft personal information protection law in the works that could become the country’s first legislation in safeguarding an individual’s data. The central bank has announced new measures to protect consumers’ rights and fined six state-owned banks for infringing them.
The government’s plan involves extending each yuan of household income. While the lending side has taken much of the blame for excesses in the online fintech draft rules, the reality is that consumers and small companies have had their borrowing capped above certain levels. Earlier this month, China loosened restrictions on licensed consumer finance companies to enable lower provision coverage ratios. That would allow them to lend more, and help consumers borrow more. The banks need retail franchises to thrive because the balance sheets of their corporate clients continue to look burdened.
It will be a challenge. Beijing has spent $1.3 trillion to lift the economy out of Covid-19.
—Bloomberg