China Expands Consumer Trade-In Scheme

By Kevin Yao and Ellen Zhang

Overview

BEIJING (Reuters) – China has added more home appliances to its consumer trade-in scheme and will offer subsidies for digital goods this year to spur demand in the sluggish household sector.

New Included Appliances

Microwave ovens, water purifiers, dish-washing machines, and rice cookers have been included in the trade-in scheme, as detailed in a document from the top state planner and the finance ministry.

Subsidies for Digital Goods

Cellphones, tablet computers, smart watches, and bracelets under 6,000 yuan will receive a 15% subsidy. However, exact costs of the incentives were not disclosed, though a finance ministry official indicated that the government has allocated 81 billion yuan ($11.05 billion) for these trade-ins.

Push for Consumer Spending

The new measures aim to support growth in the world’s second-largest economy amid a property crisis that has diminished consumer wealth and spending. Analysts emphasize urgent actions are needed to revive household consumption.

Future Projections

Xu Tianchen, a senior economist at the Economist Intelligence Unit, expects total subsidies to increase to 300 billion yuan by 2025, marking a shift toward higher consumption initiatives. Yet, limited subsidies for phones and tablets suggest a focus away from high-end consumer spending.

Impact of Past Campaigns

The previous year’s campaign allocated around 150 billion yuan from special treasury bonds for trade-ins, reportedly achieving significant sales of 920 billion yuan in autos and 240 billion yuan in home appliances. However, investor response to new announcements was tepid, with the consumer electronics stock index down 3.2%.

Government Plans

Plans for increasing funding in 2025, with emphasis on equipment upgrades and an expansion of the trade-in scheme to include IT and agricultural equipment, were discussed. The government aims to support consumer demand in various areas.

Conclusion

Chinese leaders are committed to boosting consumption across sectors, with expectations for a retail sales rebound in 2025, contingent on asset price stabilization and improved employment prospects. A 400 billion yuan low-cost relending facility has been established to assist equipment upgrades, benefiting high-tech and transportation sectors.

($1 = 7.3314 Chinese yuan)