China’s consumption revival may start with social safety net. These 3 sectors could benefit.

Subscribe to enjoy similar stories.Wu Jingliang, a human resources manager in Beijing, got a raise at the beginning of the year, and the first financial move her family made was to increase their monthly savings rate.“I don’t dare spend, because I have a child. The child will need schooling later, and then there’s marriage or buying a home—we definitely need to save up a sum of money for him,” she told Barron’s in a phone interview.Conversations with other Chinese consumers revealed similar caution, all relating to feelings of financial insecurity.Beijing keeps rolling out consumption stimulus, and Chinese consumers keep responding with less enthusiasm than policymakers hoped.

Appliance trade-ins can boost sales for a quarter. Tourism vouchers can goose spending over a holiday.

But neither gets to the deeper problem: Chinese households still feel they need to save heavily against illness, unemployment, old age, and the cost of raising children.That is why one of the most interesting investor questions in China right now is no longer how much stimulus Beijing will announce, but what kind. The strongest evidence increasingly points to a simple conclusion: China’s consumption revival will remain limited unless the state expands the social safety net and makes migrant workers fuller members of urban life.The International Monetary Fund put numbers on that argument this year.

In a February analysis, it said doubling social spending in rural areas could lift consumption by a cumulative 2.4 percentage points of gross domestic product over five years. Granting urban status to 200 million rural migrants, meanwhile, could raise the consumption-to-GDP ratio by another 0.6 percentage points.Reuters noted that roughly 300 million