Morning from Copenhagen.

As China’s week-long National Day holiday approaches, rumors are circulating about one-off cash subsidies that could be distributed to a wide range of people facing financial hardships. This potential move seems to be part of the government’s broader effort to boost public sentiment, following the People’s Bank of China’s recent announcement of easing measures. While specific details on the eligibility criteria and the exact amount of the cash handout remain unclear, it’s worth noting that about 40.4 million people already receive monthly government subsidies, and 4.74 million live in “extreme poverty.”

The last time the government issued one-off subsidies was in 2015, with veterans of World War II receiving approximately 5,000 yuan (about $712 USD). If the new lump sum is similarly significant, it could represent a full month’s wages for many factory workers, who earn around $400 USD per month. This could have a considerable impact on consumer confidence and spending, potentially injecting roughly $28 billion USD into the economy, targeting the lowest income earners in China.

However, it’s uncertain whether this new subsidy package would come from the existing budget. This year, China’s ministries have allocated about $22 billion USD for low-income groups, including those in extreme poverty, orphans, and the homeless.

Additionally, Shanghai announced on Wednesday that it would distribute 552 million yuan ($78 million USD) in coupons, which can be used for dining, hotels, and movies—another effort to stimulate consumer spending.

China seems to be swiftly rolling out measures to regain economic momentum. Closely monitoring the Finance Ministry’s actions in the coming weeks will be crucial to see if more or larger fiscal policies are in the pipeline. The latest comments from the Politburo states that “China will ensure necessary fiscal spending” gave some stem for the Hang Seng now up 3% on the day.  

While this is extremely early to draw any conclusions, our Nowcast composite Index points towards a slight uptick in Road congestion, metro traffic and International flights while box office revenues and economic activity index remains in line.  

Chart 1: Congestion and consumer spending is improving slightly in China