China Turns to Appliance Trade-In Programs to Stimulate Economic Recovery

The Chinese government has expanded a trade-in scheme allowing citizens to receive discounts on new kitchen appliances as part of efforts to rejuvenate its struggling economy amid decreasing consumer demand and a property crisis.

In a bid to revive its economy, China has broadened the scope of its trade-in programs, allowing consumers to exchange older kitchen appliances such as microwave ovens, dishwashers, rice cookers, and water purifiers for up to a 20% discount on new products. This initiative, which marks a move beyond previous offerings of televisions, smartphones, tablets, and electric vehicles, is part of a strategic approach to stimulate domestic spending.

China's economy, the second-largest in the world, has been grappling with stagnant consumer interest and an intensifying property crunch. Just recently, officials announced an allocation of 81 billion yuan (approximately $11 billion) for this consumer goods trade-in program, initially launched in March of this year. The National Development and Reform Commission indicated that these efforts have shown "visible effects," as indicated by previous trade-in schemes.

Moreover, the Ministry of Commerce reported an uptick in sales within the segments of large household appliances and vehicles, suggesting that the discount programs may be having their desired impact. However, voices in the economic sector express skepticism regarding the overall efficacy of these schemes. Economists, including Harry Murphy Cruise from Moody’s Analytics, highlight a mixed outcome — while specific products have seen increased sales, this doesn't significantly reflect a general rise in consumer expenditure.

In response to persistent economic challenges, China has aggressively pursued various measures to bolster domestic economic activity as its exporting sectors confront mounting pressures. A recent high-level meeting of China's leadership underscored the urgency to enhance consumer spending as part of a broader economic strategy, especially in light of international tensions, notably threats of tariffs on Chinese goods by incoming U.S. leadership.

In the coming week, China is expected to release its 2024 economic growth forecasts, with estimates indicating an anticipated target of around 5%, a crucial benchmark amid ongoing economic uncertainty.