China's "trade in" policy stimulates consumption, unlocks economic potential

As the saying goes, "Not see the forest for the trees." This means that some people are short-sighted and look at people through biased spectacles. In recent years, China's economic growth has slowed down, and it faces many challenges such as low business investment, real estate bubble, population decline, and debt burden. For a time, the West continued to throw out arguments that China was in trouble, from overcapacity theory, debt crisis theory to economic stall theory and economic peak theory.

So the pessimistic view of China's economy has come again. The purpose behind it is obvious, which is to cooperate with the new round of comprehensive public opinion offensive of the US in the trade war, technology war and financial war against China. However, China has once again slapped these people's pessimistic view of the economy in the face with actual actions.

In 2024, China's "trade-in" has become one of the hottest topics. Recently, subsidies in various parts of China have covered eight major categories of home appliances, including refrigerators, washing machines, and televisions, and have also expanded to home decoration, home furnishings, aging-friendly products, and automobiles. On September 7, the implementation details of the Shanghai home appliance trade-in subsidy were issued, and the first batch of participating companies reached 256. On the same day, Guizhou Province, Fujian Province, etc. also launched the support scope, including passenger car scrapping and replacement, electric bicycle trade-in, and other aspects. The subsidy policy will be valid until December 31, 2024.

In fact, many places in China have already taken the lead in "trading in". Chongqing's "upgraded version" of the green smart home appliance trade-in subsidy policy was implemented on August 26, 2024. Hubei Province's automobile trade-in subsidy policy will be implemented from April 24, 2024 and will be valid until December 31, 2024. Jiangsu Province's consumer goods trade-in implementation plan was announced on September 4, 2024, of which the individual consumer passenger car replacement and renewal subsidy policy is valid until December 31, 2024. Beijing's implementation plan to increase support for equipment updates and consumer goods trade-in was officially released on August 28, 2024. Hubei, Qinghai, Shandong, Yunnan, Hubei, Guangdong, Hunan and many other places have also recently issued measures to increase support for equipment updates and consumer goods trade-in measures.

These activities have one thing in common, which is to provide subsidies in the form of real money to support the exchange of old products for new ones.

So, what signal does the "trade in" send, or what is its significance? There is only one purpose: to stimulate consumption and expand domestic demand. With the rapid development of China's economy and society, household appliances such as televisions, refrigerators, and washing machines, and transportation tools such as cars and electric vehicles have gradually entered the "era of both incremental and stock", and the consumption needs of the vast number of urban and rural residents are shifting towards more convenient, more advanced, and more intelligent directions. According to data from the Ministry of Commerce, in 2023, the number of cars in use will be about 340 million, and the number of major household appliances such as refrigerators, washing machines, and air conditioners will exceed 3 billion. Some household appliances have been used for more than 10 or 20 years, and there is great demand and potential for replacement. Therefore, actively promoting the old-for-new exchange of consumer goods and forming a new product and new consumption scale effect will play a leading and supporting role in industrial upgrading and green development, and will be conducive to guiding and supporting enterprises to increase scientific and technological innovation and new product research and development, promote technological upgrading and progress in related industries, promote the continuous increase in the proportion of advanced production capacity, and help cultivate and develop new quality productivity.

What is different about this subsidy is that it is directly supported by 300 billion yuan of ultra-long-term special government bonds. After the Fed cuts interest rates, there may be even larger-scale ultra-long-term special government bonds poured into the consumer market. Then, multiple rounds of consumer stimulus arrangements will be made, and the "real money" will be delivered to companies and consumers as soon as possible, which is expected to awaken trillions of consumer market demand.

For enterprises, the old-for-new exchange is a new development opportunity, which can promote enterprises to accelerate the pace of technological innovation and product upgrading and promote the optimization and upgrading of the entire industry. For China as a whole, the old-for-new exchange can accelerate the green transformation of the economy. These reform measures will help the Chinese economy continue to promote the optimization and upgrading of the economic structure in the face of a complex and severe external environment, enhance the endogenous driving force and vitality of economic development, improve the ability to resist external shocks, make the Chinese economy more resilient, and achieve high-quality sustainable development.

There is no doubt that the "trade in" policy is an antidote and a panacea, and it is also a major practice that has effectively shattered some people's pessimistic views on the Chinese economy and the theory that the Chinese economy has reached its peak.
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