China will subsidize more consumer products and boost funding for industrial equipment upgrades, ramping up a program aimed at bolstering domestic consumption in the face of growing headwinds for exports.
Consumers will qualify for a 15% subsidy for buying new mobile phones, tablets and smartwatches under 6,000 yuan ($818), according to an official notice published Wednesday by China’s top economic planner and the Ministry of Finance. The actual benefit is capped at 1,500 yuan per person each year, with some restrictions placed on the number of goods people can buy.
The authorities will also expand the types of home appliances eligible for state support to 12 from eight last year, according to the announcement. New agricultural machines are added under the industrial equipment upgrade and companies in sectors such as electronic information and work safety are included to get the benefit this year.
China has made boosting consumption a higher priority this year as it looks to fight deflation amid subdued household and business confidence. Exports as a growth engine may also lose steam as trade tensions with the US will likely intensify with Donald Trump returning to the White House later this month.
Speaking at a briefing on Wednesday, Zhao Chenxin, a vice chairman at the planning body, the National Development and Reform Commission, said the program plays an important role in “expanding effective investment, boosting consumer demand, promoting green transformation, and improving people’s livelihood.”
“We will strengthen and expand the program this year, and our general consideration is to increase the funding scale, broaden the products to be supported, optimize the implementation mechanism and amplify the multiplier effect,” he said.
Stock investors were unimpressed by the latest effort. The benchmark CSI 300 Index of onshore shares fell 1.5% as of mid-day break, led by information technology firms. Chinese stocks trading in Hong Kong also lost 1.5%.
Bond Proceeds
China will continue to distribute ultra-long special sovereign bond funds among local governments to help them hand out subsidies to consumers under the program this year.
The allocation will take into consideration factors ranging from the size of the local economy and the number of existing cars and home appliances in the area to the implementation of the program in 2024, according to the notice. Regions that performed better in rolling out the initiative last year will receive preferential access to finding in 2025, it said.
The central government has already extended 81 billion yuan to local authorities to support the program this year, Fu Jinling, a senior Finance Ministry official, said at the briefing.
The authorities will also arrange funds raised from the sales of ultra-long sovereign special bonds to provide loan discounts for companies to upgrade to new equipment on top of the 1.5% compensation already offered by the central government, the officials said.
The new consumer goods covered by the initiative this year are microwaves, water purifiers, dish washers, and rice cookers. Consumers will also get more cash compensation from the government for spending on decoration materials to refurbish homes, according to the notice.
Subsidies on a number of agricultural machines including cotton pickers and grain driers will be raised by a third to 80,000 yuan per item, and a similar increase applies to the upgrading of some buses and power batteries used by vehicles that are out of warranty.
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