EconoScope | Substantial trade-in incentives to expand China consumer market

(ECNS) -- China has allocated approximately 150 billion yuan ($21.07 billion) in ultra-long-term treasury bonds to local governments, offering significant support for upgrading old consumer goods including cars, refrigerators, washing machines, TVs, and air conditioners.

Local governments in Beijing, Shanghai, Tianjin, and Guangdong have introduced detailed measures, with Shanghai in particular allocating more than 4 billion yuan, a historical new record high.

In the first half of the year, consumption expenditure contributed 60.5 percent to China’s economic growth, driving a 3.0 percentage point increase in GDP.

This indicates consumption has become the main driver of China's economic growth.

The CPC Central Committee Political Bureau meeting held on July 30 called for economic policies to focus more on improving livelihoods and promoting consumption.

Government subsidies now cover trade-in of old household appliances, electric bicycles and cars for new ones, as well as purchasing materials for home renovations, kitchen and bathroom upgrades, and age-friendly home modifications.

Car subsidies have significantly increased. Those for scrapping and replacing cars have risen from 10,000 yuan for purchasing new energy vehicles and 7,000 yuan for purchasing fuel-powered vehicles to 20,000 yuan and 15,000 yuan, respectively.

In many regions, car subsidy standards for replacement and upgrades have also been raised. For example, in Shanghai, the subsidy for personal consumers trading in old vehicles for new electric cars has increased to 15,000 yuan, and to 12,000 yuan for fuel-powered equivalents. 

Local governments have further expanded the types of subsidized products. In some places, even buying a mobile phone is eligible for subsidies. 

For example, Guangdong Province has included three categories of products including mobile phones, tablets, and smart wearable devices for subsidy, among which the subsidy standard for mobile phones is set at 10 percent of the sales price, with a maximum subsidy of 1,000 yuan per item.

A trade-in program for electric bicycles is also being implemented.

Shenzhen City has proposed to replace about 250,000 electric bicycles across the city, offering personal consumers a subsidy of 20 percent of the new bike’s sales price, with a maximum subsidy of 800 yuan.　　

Zhu Keli, founding director of the China Institute of New Economy, stated in an interview with China News Network that the policy to upgrade consumer goods includes more items for larger subsidy, which will effectively stimulate consumer enthusiasm for replacement purchases, and directly boost growth of the consumer market.

Consumption is showing positive signs. In July, the total retail sales of consumer goods increased by 2.7 percent year-on year, accelerating by 0.7 percentage points compared to the previous month.