Beijing:
China is expanding its consumer trade-in scheme to revive demand in the sluggish household sector. The move includes adding more home appliances to the list of products eligible for trade-in and offering subsidies for digital goods. Microwave ovens, water purifiers, dish-washing machines, and rice cookers are among the new additions to the scheme.
Consumers who trade in old goods will receive subsidies of 15-20%. Cellphones, tablet computers, smart watches, and bracelets under 6,000 yuan will also be eligible for a 15% subsidy. The government has allocated 81 billion yuan ($11 billion) for the program in 2025.
The trade-in scheme was initially launched last March, with a budget of 150 billion yuan funded through special government bonds. The program was used by 36 million consumers to buy 240 billion yuan worth of home appliances, driving 920 billion yuan of car sales.
China’s top economic planning body has said the schemes have already produced “visible effects” in boosting consumer spending. However, some economists have questioned whether the schemes will be enough to significantly increase consumer demand.
“The downside of such a policy is you are just pulling forward future demand,” Hui Shan, chief China economist at Goldman Sachs said. “If I’m going to replace my air conditioner once every 10 years, [you’re] pulling the next few years of demand into now.”
This trade-in scheme is also reminiscent of former US president Barack Obama’s “cash for clunkers” initiative, through which consumers could trade in old cars for new ones, post the 2008 global financial crisis.
However, Frederic Neumann, chief Asia economist at HSBC, said that such trade-in programmes are helpful only for a short-term goal and said that China would need more policies that would aid consumption for a sustainable change.
The expansion of the trade-in scheme comes as China faces challenges such as weak consumer demand and a deepening property crisis. In December, a key meeting of China’s leaders stressed the need for “vigorous” efforts to boost consumer spending. China is due to announce its 2024 economic growth figures next week, which Beijing expects to be around 5%.
