Group 1 - The "old-for-new" policy has contributed to a good growth in national consumption in the first five months, but long-term consumption promotion requires more reforms and measures, such as stabilizing the stock and real estate markets, improving income expectations, and optimizing wealth distribution [1][2] - In May, China's total retail sales of consumer goods increased by 6.4% year-on-year, with a month-on-month acceleration of 1.3 percentage points, marking the highest consumption growth rate since 2024 [1] - The "old-for-new" policy is seen as a temporary measure that may lead to a decrease in future demand for durable goods, indicating the need for additional methods to further improve consumption [1] Group 2 - Stabilizing residents' wealth, particularly in the stock and real estate markets, is crucial for boosting consumer confidence, as a significant portion of Chinese residents' wealth is tied to real estate [2] - Improving income distribution is considered the most important means to promote consumption growth, with suggestions to reform the social security system and increase rural pension levels to enhance consumption among low-income groups [2] - The real estate sector is vital to China's domestic demand, with a current annual decline of about 10% and a 22% year-on-year drop in new housing starts [2][3] Group 3 - The real estate market's stability is closely linked to local government finances and has a profound impact on infrastructure and consumer wealth [3] - Current policies like interest rate cuts and the removal of purchase restrictions have been extensively utilized, but the effectiveness of policies aimed at improving real estate companies' cash flow is limited [3] - It is essential to clear real estate market debts, allowing developers to go bankrupt if necessary, while ensuring that debts are repaid and pre-sold properties are delivered, with reasonable compensation for buyers if delivery fails [3]

Core Viewpoint - The interview with Nomura's chief economist Lu Ting highlights the need for structural reforms to boost consumption and stabilize the real estate market in China, emphasizing the importance of improving income distribution and social security systems [2][4][7]. Consumption Insights - The "old-for-new" policy has contributed to a 6.4% year-on-year increase in China's retail sales in May, marking a new high for 2024 [3]. - However, Lu Ting warns that this policy is a temporary measure and may lead to a decrease in future demand for durable goods [3]. - To sustain consumption growth, there is a need for more comprehensive methods beyond the "old-for-new" initiative, such as enhancing subsidies and expanding the range of subsidized products [3]. Real Estate Market Analysis - The real estate sector is crucial for China's domestic demand and is currently in its fifth year of decline, with a 10% annualized decrease and a 22% drop in new housing starts [7]. - The stability of the real estate market is essential for consumer confidence, as a significant portion of household wealth is tied to real estate [4][7]. - Traditional measures like interest rate cuts and lifting purchase restrictions have been largely exhausted, necessitating a focus on clearing real estate market debts [8][9]. Recommendations for Policy Changes - Lu Ting suggests that the government should allow failing developers to go bankrupt while providing support to viable ones, ensuring that debts are repaid and pre-sold properties are delivered [8][9]. - He advocates for a reform of the social security system, particularly increasing rural pension levels from an average of 243 yuan/month to 400-500 yuan/month, which could enhance consumption among low-income groups [4][6]. Local Initiatives - The "Su Chao" initiative is highlighted as a successful example of local efforts to stimulate demand by creating favorable consumption environments [5][6].