Nationwide trade-in initiative aims to spur sluggish growth

China has initiated a nationwide push to encourage consumers to trade in their old goods for new ones, with a particular focus on key products such as automobiles, household appliances and home improvement items.

By encouraging consumers to upgrade to more efficient and environmentally friendly products, the initiative aims to not only spur economic growth, but also contribute to long-term environmental sustainability and resource conservation, officials and experts said.

Against the backdrop of a global economic landscape marked by sluggish growth momentum and recurrent issues such as geopolitical conflicts and international trade tensions, China faces a scenario where domestic effective demand is insufficient, placing significant pressure on businesses, said Xu Hongcai, deputy director of the China Association of Policy Science's Economic Policy Committee.

In response to the complex situation, the emphasis for the second half of the year will be on revitalizing consumption to expand domestic demand, with economic policies pivoting toward promoting consumption while enhancing livelihoods, Xu added.

In late July, the National Development and Reform Commission, the country's top economic regulator, and the Ministry of Finance rolled out a series of measures aimed at intensifying support for trade-in programs.

The new measures have significantly increased support for the programs, with the allocation of an ultra-long-term treasury bond of 150 billion yuan ($21 billion) to facilitate local initiatives for the trade-ins of consumer goods. Under the revised subsidy scheme, the incentives for trading in old vehicles for new ones have been substantially enhanced.

The subsidy for purchasing new energy vehicles, previously set at 10,000 yuan, has been doubled to 20,000 yuan. Similarly, for the purchase of conventional fuel vehicles, the subsidy has been increased from 7,000 yuan to 15,000 yuan.

As of Aug 2, the number of applications for car scrappage and renewal subsidies has surpassed 450,000, showcasing a rapid growth trend in consumer participation, said Xu Xingfeng, director of the market operation and consumption promotion department of the Ministry of Commerce.

In the first half of the year, the volume of scrapped cars collected for recycling witnessed a significant surge, registering a year-on-year increase of 27.6 percent, Xu added.

Car owners who have already received 10,000 yuan for trading in their old vehicles are eligible to receive an additional 10,000 yuan, the director said. The measure ensures that those who embraced the trade-in initiative before the subsidy was increased get what they deserve.

In addition, the government has announced subsidies for eight household products — refrigerators, washing machines, televisions, air conditioners, computers, water heaters, domestic stoves and range hoods.

Furthermore, in a move to enhance living spaces, a detailed focus has been placed on home improvement initiatives, which encompass enhancements such as renovations for older homes, partial transformations of kitchen and bathroom spaces, improvements for the homes of elderly people and the adoption of smart home technologies.

Retail sales for household appliances in the first half of the year witnessed a year-on-year increase of 3.1 percent, representing a notable acceleration of 2.1 percentage points during the period, Xu said, adding that in the home improvement sector, retail sales for furniture experienced a 2.6 percent year-on-year growth.

In recent years, China's economy has experienced a remarkable surge, leading to widespread adoption and rapid penetration of durable consumer goods across the nation, said Wang Wei, researcher at the Development Research Center of the State Council.

With durable goods becoming increasingly ubiquitous, Chinese people own over 3 billion household appliances and more than 300 million vehicles, reflecting a burgeoning demand for product upgrades and replacements in the trillion-yuan market, Wang said.

The momentum toward promoting large-scale trade-ins of consumer goods for newer models not only aligns with the imperative to enhance consumption quality but also serves as a catalyst for the evolution of the domestic market toward a more demand-driven, circular economy, the researcher added.