Governments are prodding shoppers with vouchers and checks, but it won't be enough to overcome the global slowdown
Clare Cheng's family is crazy about seafood. So when Cheng received a voucher worth $108 from the Taiwanese government in January, she treated her parents and two sisters to oysters, salmon, and scallops at a local restaurant. "My mother loves the all-you-can-eat buffet," says Cheng. "We used up the entire voucher."
Cheng's family outing came courtesy of an Asia-wide push to persuade people to spend. One of Asia's traditional strengths, a penchant for saving, has become a weakness in the current downturn. Their fat bank accounts funded Asia's exporters. Now, with exports off by nearly half in some countries, governments from Beijing to Bangkok are scrambling to boost consumption to make up the difference.
Most countries seem to think extra cash will get people to open their wallets. In Taiwan's $2.5 billion program, each of the island's 23 million residents got a $108 voucher that can be used just like cash—except that it must be spent by yearend. In China, Hangzhou, Nanjing, Ningbo, and other cities are handing out coupons worth up to $30 for locals to spend in restaurants and hotels. Thailand is sending checks worth $58 to more than 10 million low-income workers, and Japan is distributing $130-$200 to every citizen—some $20 billion in all.
Economists say Taiwan's voucher program is the right approach. While Japan's cash payments can be stuffed under the futon, vouchers force recipients to actually spend. Taiwan's scheme has gotten an extra boost from additional discounts some retailers are offering to those paying with vouchers. "It's quite a good thing at the right time," says Norman Yin, a finance professor at National Chengchi University in Taipei, who spent his handout on computer accessories. "But it's only a short-term means."
Therein lies the rub. One-off payments aren't about to alter lifelong saving habits. To encourage higher spending, governments need to improve public health, education, and retirement benefits; without them, people are inclined to save rather than shop. Worse, it's unclear whether any amount of domestic spending can make up for falling exports anytime soon. While programs aimed at getting Asians to hit the mall may have some effect, they won't be enough to offset the global slowdown. Says Supavud Saicheua, a Merrill Lynch economist in Bangkok: "We can only hope for some sort of miracle in the U.S. and Europe."