China has expanded a program to support consumers who trade in old appliances such as air conditioners and washing machines, as policymakers seek to confront weak consumption in the world's second-largest economy.
The policy initiative, launched last year to encourage purchases of cars and home appliances, will now also include microwaves, rice cookers, dishwashers and water purifiers as well as smartphones and tablets costing less than RMB6,000.
Consumers who trade in old goods will receive subsidies of between 15 and 20 percent, the National Development and Reform Commission said, ChinaThe state planner said at a news conference on Wednesday in Beijing, where a Finance Ministry official said 81 billion renminbi ($11 billion) would be allocated to the program in 2025.
The expansion of the scheme follows calls for Beijing to do more to support consumer spending as growth momentum slows and weakness in the real estate sector continues to weigh on consumer and investor confidence.
The government is “thinking about consumption and boosting consumption,” said Hui Shan, chief China economist at Goldman Sachs, adding that the scheme had a “very obvious impact” on sales volumes.
“The downside of such a policy is that you are only pushing forward future demand,” she added. “If I were to replace my air conditioner once every 10 years, you would attract demand for the next few years to now.”
The trade-in scheme was initially launched last March with echoes of former US President Barack Obama's “cash for old cars” initiative, which allowed consumers to trade in old cars for new ones in the wake of the 2008 global financial crisis. Officials said the 2024 budget of RMB150 billion , financed through special government bonds, were used up by the end of the year.
The Ministry of Commerce said that 36 million consumers used the program last year to buy home appliances worth RMB240 billion, and that it led to an increase in car sales worth RMB920 billion.
In addition to household appliances and cars, the program also aims to stimulate companies to modernize industrial equipment and agricultural machinery.
Last month, the National Bureau of Statistics said retail sales in November were boosted by the programme, noting a 22 percent year-on-year increase in sales of home appliances and audio-visual products such as televisions. Sales of building and decoration materials, which are also covered by the program, turned positive for the first time since April.
But overall retail sales rose just 3 percent in November, missing expectations Reignite fears On the pace of consumption growth, while real estate data showed the largest year-on-year decline in new home prices since 2015 and a growing decline in real estate investment.
China last September Absolute measures To support stocks and the housing market, where sales are struggling to gain traction on the back of the year-long real estate slowdown. The authorities have also launched similar “replacing old with new” housing schemes.
Last month, President Xi Jinping He promised to make “resolute” efforts. To boost consumer demand this year.
Frederic Neumann, chief Asia economist at HSBC, said most analysts see trade programs as useful for building confidence in the short term, but noted that China needs more policies that encourage consumption on a more sustainable basis.
Additional reporting by Wang Xueqiao in Shanghai
