Efforts to Boost Domestic Demand in China

In Nanning, Guangxi Zhuang autonomous region, cars featured in a trade-in program attract potential buyers during an expo. These initiatives are a part of China’s robust efforts to enhance domestic consumption and investment this year.

In light of the challenges posed by both domestic dynamics and external factors, China is implementing stronger measures to encourage equipment upgrades and consumer goods trade-ins. Officials and experts note that these strategies will be key to stimulating consumer demand and aiding economic recovery.

Prominent funding from ultra-long-term treasury bonds coupled with broader eligibility criteria for subsidy programs will enable more households and businesses to benefit. This is expected to provide a significant boost to economic growth and recovery across the country.

According to Zhao Chenxin, deputy head of the National Development and Reform Commission, past experiences demonstrate that these initiatives have effectively driven consumer spending, increased investments, supported industrial upgrades, and furthered China’s green transformation.

In 2024, retail sales of new energy passenger vehicles reached an impressive 11 million units. Additionally, the volume of equipment upgrades in key sectors was projected to exceed 20 million units, highlighting the success of these programs.

As geopolitical tensions rise, particularly with the potential return of tariffs from the new U.S. administration, bolstering domestic demand has become increasingly crucial to offset external pressures, says Zhang Yongjun from the China Center for International Economic Exchanges. Creating a strong and expansive domestic market is essential for China’s ongoing development and modern ambitions.

China’s government has expanded its equipment upgrade program to focus on advanced, intelligent, and eco-friendly technologies this year. They are allocating funds for loan interest subsidies to reduce financing costs for businesses, thus fueling more investment in modern and efficient technologies.

This initiative includes an expanded range of trade-ins, now covering items like mobile phones, tablets, and smartwatches, enhancing consumer engagement across various goods.

Last year, the government allocated 150 billion yuan (approximately $20.5 billion) through ultra-long-term treasury bonds to support trade-in programs, which led to a significant increase in new consumption. Analysts from Golden Credit Rating International project that this year’s funding will double to 300 billion yuan, potentially leading to an estimated 750 billion yuan in new consumer spending.

This influx of funding is anticipated to enhance the growth of total retail sales of consumer goods by 1.5 percentage points year-on-year in 2025, significantly contributing to economic stabilization.

Additionally, the central government has front-loaded 81 billion yuan for the consumer goods trade-in program in 2025, emphasizing its importance for immediate and long-term economic strategy. Analysts highlight that funding will be strategically distributed to regions that demonstrated the most success with trade-ins last year, ensuring the maximum impact on boosting local economies.

demand, economy, investment