China's Consumer Goods Trade-in Program Receives Continued Funding Support

China reaffirms its support for the consumer goods trade-in program, committing 300 billion yuan (41.84 billion USD) in treasury bonds to sustain government subsidies throughout 2025. This doubles the funding from last year, with two tranches issued in January and April, and further allocations planned for July and October. The program encourages consumers to replace outdated products with newer, more efficient models, as part of the government's strategy to stimulate domestic consumption.

China has reaffirmed its commitment to the consumer goods trade-in program by allocating 300 billion yuan ($41.8 billion) in treasury bonds for government subsidies throughout 2025. This substantial funding, which doubles the amount from last year, will be distributed in two tranches in January and April, with additional allocations planned for July and October. The program aims to encourage consumers to replace outdated products with newer, more efficient models, thereby stimulating domestic consumption.

The rapid use of subsidies has led to a surge in retail sales, particularly in the home appliances and electronics sector, where growth exceeded 50% in May. However, the program has faced challenges, including the suspension of subsidies in several provinces due to funding shortages. Henan and Chongqing have temporarily halted the program, while Jiangsu and Guangdong have imposed restrictions on the daily quota of subsidies. These disruptions highlight the need for more sustainable measures to ensure the long-term success of the program.

Beijing has responded to these challenges by planning a stable pace of subsidy distribution. State media has reported that the central government will guide local authorities to use the remaining funds at a steady rate, ensuring that the program continues to support consumer spending. The government's strategy also includes policies aimed at lifting business confidence to encourage private investment and hiring, which could translate into stronger consumption over time.

The consumer goods trade-in program is a significant component of China's economic stimulus efforts, particularly in anticipation of potential US tariffs. While the program has shown short-term success in boosting retail sales, economists caution that the long-term effectiveness depends on the implementation of sustainable measures. The program's success may also be disrupted in June due to funding shortages in some regions, according to Goldman Sachs economists.

China's interest bill is increasing quickly, putting pressure on the government's spending power. However, the government is unlikely to change course on its flagship policy of consumer subsidies despite recent setbacks. Some regions have suspended the program due to promotions during the "618" shopping festival and to prevent "arbitrage" by retailers inflating prices. These challenges highlight the need for careful management and oversight of the subsidy program.

In summary, China's commitment to the consumer goods trade-in program is evident in the substantial funding allocated for 2025. While the program has faced challenges, the government's strategy of stable funding distribution and policies to lift business confidence suggests a commitment to long-term success. The program's effectiveness will depend on the ability to implement sustainable measures and manage potential disruptions.

References:
[1] https://finance.yahoo.com/news/china-consumer-rush-subsidies-overloads-033814779.html
[2] https://wtvbam.com/2025/06/18/china-will-issue-remaining-consumer-goods-subsidies-at-stable-rate-state-media-says/
[3] https://www.tradingview.com/news/reuters.com,2025:newsml_P8N3QF04I:0-china-will-issue-next-quarter-s-consumer-goods-subsidies-in-july-xinhua-reports/