China’s Big Trade-In Plan: A Boost for Consumption or Just a Drop in the Bucket?
China’s ambitious plan to stimulate consumer spending through a massive trade-in program has yet to deliver on its promise, according to several businesses interviewed by CNBC. Despite allocating 300 billion yuan ($41.5 billion) in special government bonds to incentivize trade-ins on everything from cars and appliances to elevator upgrades, the program’s impact on the ground remains unclear. While analysts acknowledge the potential of the plan, most are not overly optimistic about the scale of its impact on retail sales.
Key Takeaways:
- China’s trade-in program is aimed at boosting consumption, but its effectiveness remains uncertain.
- The program offers subsidies for trade-ins of cars, home appliances, and other consumer goods, as well as upgrades for industrial equipment.
- Businesses and analysts are waiting for concrete signs of the program’s success, as most tangible results are yet to be observed.
- The trade-in policy is focused on incentivizing purchases of new energy vehicles, but the impact on the overall secondhand market is still being assessed.
- While the long-term benefits of the program are still unclear, its potential to boost the secondhand market and encourage sustainable consumption is undeniable.
Waiting for Elevator Modernization
The program’s focus on equipment upgrades presents an intriguing case. With over 800,000 elevators in China older than 15 years, the initiative aims to incentivize modernization, promoting energy efficiency and safety. However, despite the significant number of elevators targeted, major foreign companies like Otis and Kone, while optimistic about the opportunity, have yet to see a surge in new orders stemming from the program. They attribute this to the initial stages of implementation and the need for clarity regarding allocated funds for elevator upgrades. While Otis witnessed a double-digit decline in new equipment sales in China during the second quarter, Kone’s revenue in the region dropped by over 15% in the first six months of 2024, largely impacted by the property slump. Both companies are hopeful that the program will eventually contribute to increased demand for new and more energy-efficient elevators, potentially boosting their service businesses as well.
Secondhand Market Outlook
The success of the trade-in program also relies heavily on the health of the secondhand market. ATRenew, a company specializing in processing secondhand goods, has seen an increase in trade-in volume for specific categories and regions, particularly for mobile phones and laptops in parts of Guangdong province. The firm attributes this rise to the new policy and believes it will contribute to the long-term development of the secondhand market, advocating for increased government support in building dedicated trade-in kiosks in communities. While the program offers a potential boost to the secondhand market, its impact on the overall consumer spending remains unclear.
A Long Road Ahead
The implementation of China’s ambitious trade-in program is still in its early stages, and concrete results are yet to be observed. While businesses like ATRenew are optimistic about its long-term impact on the secondhand market, others like Otis and Kone are waiting for more tangible benefits, particularly in areas like elevator upgrades. The effectiveness of the program will depend on how well local governments manage the implementation process and how effectively they can utilize the allocated funds to incentivize both consumers and businesses to participate in the trade-in market. The success of this program will be a crucial indicator of China’s ability to stimulate domestic consumption in a challenging economic environment, even as the long-term consequences for the secondhand market and sustainable consumption are still unfolding.
