Jamie Spencer
China has doubled its consumer trade-in subsidies to 300 billion yuan ($41.47 billion) in 2025, targeting specific goods while avoiding direct cash handouts. The program, which covers mid-range smartphones and home appliances, is an expansion from last year’s 150 billion yuan initiative.
Stimulating Retail and Economic Growth
The subsidies will cover around 15% to 20% of the purchase price of select items, a move expected to bolster retail sales. Jacob Cooke, CEO of WPIC Marketing + Technologies, noted that similar programs have previously boosted e-commerce sales and believes further subsidies may follow.
Chinese Premier Li Qiang emphasized boosting consumption as the top economic priority, marking the first time in a decade that the government has placed such high importance on domestic spending.
Addressing Deflationary Pressures
Amid concerns over deflation, China’s consumer price index (CPI) fell below zero in February for the first time in over a year. Officials have outlined measures to counteract this trend, including increased fiscal support, consumption incentives, price regulation, and real estate stabilization.
Real estate remains a key focus, as it accounts for most household wealth in China. Efforts to stabilize the sector are expected to contribute to overall economic confidence and spending.
Investment in Long-Term Consumer Confidence
The Chinese government is also working to increase income growth and reduce financial burdens for lower- and middle-income groups. Initiatives include improvements in elderly and child care, healthcare, and paid vacation policies.
China’s household spending remains below international averages, at less than 40% of GDP compared to the global norm of around 60%. Analysts suggest that further structural changes will be needed to fully unlock domestic consumption.
Targeted Economic Sectors
The new consumption plan focuses on specific areas, including:
- Big-ticket items: Real estate transactions and automobile purchases.
- Experience economy: Tourism, gaming, and traditional culture-driven spending.
- Consumer goods: Subsidized trade-ins and tech upgrades.
Authorities have also emphasized investment in technology, talent, and infrastructure to further boost long-term economic stability.
Impact of Subsidies on Sales
Preliminary data suggests a positive response to China’s consumption incentives. In February, retail sales of new energy vehicles surged nearly 80% year-on-year to 686,000 units, benefiting from trade-in subsidies of up to 15,000 yuan per vehicle.
Similarly, smartphone sales between January 20-26 jumped 65% compared to the same period in 2024, driven by demand for AI-enhanced devices. Analysts expect these subsidies to contribute at least two to three percentage points of additional growth in smartphone sales for the year.
China will release a more detailed plan for boosting consumption in the coming weeks, with officials highlighting the importance of sustained policy support to drive economic momentum.
