Residents of Wuhan grabbed RMB 30 million ($4.2 million) worth of WeChat coupons in 9 minutes on Sunday, WeChat developers said in a blog post. The coupons generated transactions worth 13 times their value on the first day of usage. The vouchers are offered by the local government as well as individual merchants through WeChat Pay. Users get the vouchers via lucky draw through a WeChat mini-program.
Why it matters: China’s central and local governments are hoping that spending vouchers will stimulate domestic economic activity, as global demand is wavering.
- As the epicenter of the Covid-19, Wuhan suffered the most severe lockdowns that resulted in economic stagnation. The two-month lockdown ended on April 8.
- WeChat described the vouchers as a way to contribute to “revenge spending,” as consumers unleash their built-up “purchasing power.”
- WeChat is China’s second most popular digital payments tool. It accounts for almost 40% of the market (in Chinese), market research firm Analysys said.
Details: The coupons issued on Sunday are the first batch in a series that will total RMB 2.3 billion. The Wuhan government will be issuing RMB 500 million in coupons. Individual merchants will contribute an extra RMB 1.8 billion, WeChat said.
- They are valid in various restaurants, supermarkets, malls and cultural sites.
- The app can use its technology to distribute coupons to vulnerable groups and small businesses, increasing the efficiency of the program, WeChat said.
- In Hubei’s neighboring Hunan province, coupons distributed between March 27 and April 7 increased consumption by 53 times compared to the same time period in February. WeChat said that 80% of the sales benefited small and medium enterprises (SMEs).
- In a city in Zhejiang, the province near Shanghai, vouchers issued on March 29 led to an over 200-fold increase in average daily sales from local SMEs.
- Over RMB596 million in coupons will be made available to cities in Guangdong, and Xiching district in Beijing will be offering RMB150 million.
Context: China reported its first GDP contraction since it started releasing records in 1992 earlier in April. On March 28, a consortium of 23 government agencies issued a directive telling local governments to “raise residents’ purchasing power.”
- The first city to issue coupons through WeChat was Qingdao in Shandong province, about a month ago. Other cities, like Nanjing and Ningbo, are providing coupons without using WeChat.
- Even big tech suppliers like Huawei has been adversely affected by the pandemic. The Shenzhen-based telecoms company said its revenue in the first quarter of 2020 grew by 1.4% year-on-year. In the same period in 2019, revenue growth was 39.
- A major infrastructure push is also in the works. Beijing will throw RMB1 trillion this year in 5G, artificial intelligence, and road infrastructure, analysts expect.