Yearender-Economic Watch: China's trade-in program spurs demand, green growth

BEIJING, Dec. 20 (Xinhua) -- While decorating his new apartment, Lu Yuan, a newlywed in south China's Guangxi Zhuang Autonomous Region, chose to wait for several months for the right time to place an order for a seven-piece household electronics package.

His patience paid off. Thanks to government subsidies that came into effect in August, he managed to shave about 25,000 yuan (about 3,477 U.S. dollars) off the total cost.

Tens of millions of people across China have benefited from a multibillion-dollar consumer goods trade-in program this year, amid government efforts to help the world's second-largest consumer market cope with headwinds from external uncertainties and insufficient domestic demand.

A wide range of consumer goods, including home appliances, electric bicycles and new-energy passenger cars, have seen their combined sales revenue surpass 1 trillion yuan so far this year under the trade-in program.

The program, part of a State Council action plan issued in March, came nearly 15 years since the last similar initiative for the renewal of consumer goods. Months into its implementation, the scheme has had a remarkable effect on unlocking the potential of domestic consumption and propelling the green transition in industry.

SPURRING DEMAND

Consumers like Lu are at the heart of China's push to shore up economic growth amid an increasingly complex environment at home and abroad. The annual tone-setting Central Economic Work Conference held last week vowed to vigorously boost consumption, improve investment efficiency, and expand domestic demand on all fronts next year.

While the country used to rely on investment and exports for economic expansion, consumption has increasingly played a predominant role in recent years under its strategy of advancing a "dual-circulation" development pattern, which takes the domestic market as the mainstay while allowing domestic and international markets to reinforce each other.

In the first three quarters of 2024, consumption contributed 49.9 percent of the country's economic growth, substantially surpassing investment and exports, which accounted for 26.3 percent and 23.8 percent, respectively.

Chen Lifen, a researcher at the Development Research Center of the State Council, said the trade-in program not only provides substantial economic benefits for consumers, but also brings new growth points to sectors such as home appliances and furniture, while significantly galvanizing the overall consumer market.

Driven by subsidies, retail sales of household appliances and audiovisual equipment, furniture and automobiles increased 22.2 percent, 10.5 percent, and 6.6 percent year on year in November, respectively, becoming a major contributor to overall consumption growth, according to the National Bureau of Statistics (NBS).

Across the board, retail sales of consumer goods in China rose 3.5 percent year on year in the first 11 months of this year, outpacing that for the third quarter, NBS data shows.

The conference said that large-scale equipment upgrades and consumer goods trade-in programs should be promoted with greater intensity and scope.

It is widely acknowledged that those policies have been highly effective this year, said an official from the Office of the Central Committee for Financial and Economic Affairs. The official noted that efforts will be intensified next year, with more funds to be allocated, a broader range of consumer goods included in the scope of support, and improvements made to the subsidy distribution process.

This year, 150 billion yuan raised through ultra-long special treasury bonds have already been allocated to local governments to support the trade-in program.

"We expect the trade-in program to continue playing a crucial role in boosting consumption," said Lu Ting, chief China economist at Nomura.

There is plenty of potential to tap. China's middle-income group has reached 400 million people and is expanding toward 800 million in the next 15 years, forming the world's largest and most dynamic middle-income group.

Fu Yifu, a research fellow with the Star Atlas Institute of Finance, believes that, with pro-consumption policies taking effect and further economic recovery, the positive trend in the consumer market is expected to continue.

"With the implementation of a series of palpable policies, market confidence will continue to strengthen, effectively bolstering the momentum of economic growth," said Chen.

GREEN RENEWAL

By offering attractive benefits for consumers, the trade-in scheme not only encourages people to buy more, but also adds fuel to the green transformation of industries with subsidies tilting towards environmentally friendly products.

For instance, consumers trading in an old car for a new-energy vehicle are entitled to a 20,000 yuan subsidy, higher than the 15,000 yuan received by those opting for a new fuel-powered car. Similarly, more subsidies are provided for the purchase of home appliances that meet higher standards of energy or water efficiency.

During the first 11 months of the year, the total retail sales of new-energy passenger cars amounted to 9.59 million units, representing a 41.2 percent increase from the previous year, data from the China Passenger Car Association shows.

More consumers turned to greener products during this year's "Double 11" online shopping spree, which took place from Oct. 31 to Nov. 11. Statistics show that over 92 percent of home appliances sold on Tmall were at the most energy-efficient or water-efficient level.

"As the trade-in policy provides more subsidies for energy-efficient products, it promotes the replacement of energy-consuming equipment," said Wang Kui, a manager with the trade-in program at Taobao and Tmall Group. "A trend of 'green consumption' is now becoming mainstream."

Apart from the government, enterprises have also joined in the initiative to spur spending on green products. On-demand delivery service provider Lalamove offers up to 4,000 yuan in subsidies for its registered drivers who replace their old vans with new-energy vehicles through the company's second-hand vehicle transaction platform.

"My monthly cost of providing freight services will be slashed by 80 percent, thanks to the cheaper cost of charging compared with fuel use," said a driver surnamed Luo based in south China's Guangdong Province, who recently purchased a new-energy van and sold his old oil guzzler via Lalamove's platform.

Efforts should be made to ramp up the green transition in all areas of economic and social development, according to the Central Economic Work Conference. The trade-in program is expected to add more impetus to that drive.

With consumers more inclined to purchase products with higher energy efficiency under the program, the green transformation and high-quality development of relative industries will be facilitated, said Chen. ■