Government trade-in policy this year energizes consumer spending
Oliver Lu, 29, wanted to upgrade his old microwave oven, so he went to an appliance store in Shanghai and ended up saving over 700 yuan (US$96) on a new microwave, a shaver set and a coffee machine.
His first visit to a retail shop in six months was motivated by a government program that subsidizes trade-ins as part of a national policy to stimulate sluggish consumer spending intended to reverse the economic slowdown.
Lu said one of his friends told him he had saved 1,800 yuan under the recently upgraded trade-in program.
“I had heard of the program, but didn’t really pay much attention until I heard he saved so much,” said Lu. “That’s about a fifth of my monthly salary. It was too tempting to ignore.”
Last March, China’s State Council, or Cabinet, announced it was allocating 300 billion yuan in special government bonds to the trade-in program, known as liang xin（两新）. Half of the money was earmarked as subsidies for consumer goods like kitchen appliances; the other half for upgrades of large equipment such as apartment block elevators.
In August, the program extended subsidies for automotive trade-ins. The subsidy for purchase of a new-energy vehicle was doubled from 10,000 yuan to 20,000 yuan.
Provincial and municipal governments in charge of implementing the subsidies have also initiated or expanded their own programs to complement the national policy.
In September, Shanghai unveiled plans to provide a 15 percent subsidy for consumers upgrading certain household appliance and home décor products. Under the policy, local residents have been able to take advantage of subsidies up to 2,000 yuan when purchasing items like sofas, mattresses and air purifiers.
Products related to the elderly also became a category in Shanghai, while consumer drones became eligible in the southern city of Shenzhen.
The program is due to end this month, and it’s unclear if any elements of it will be extended. Many consumers, like Lu who hesitated at first, eventually jumped in before the program ends, after friends and work colleagues boasted about their savings.
Shops, whether online or physical ones, promote the national subsidy program big and bright to attract consumers.
As of November 11, according to the Ministry of Commerce, the program had received nearly 3.7 million applications related to automotive trade-ins, while more than 21.6 million consumers bought almost 33 million appliances in eight categories of the national program, especially kitchenware like gas stoves and range hoods.
Shanghai retail sales in October rose nearly 11 percent from a year earlier to 161.3 billion yuan, according to the Shanghai Bureau of Statistics.
The trade-in policy had a positive impact on the November 11 annual shopping extravaganza known as Singles Day.
The trade-in program this year has not only left very positive impact on Rinnai products, but also accelerated the company’s green transformation.
“Due to a decline in the property market, sales of home appliances had dropped, so we didn’t expect much for Singles Day this year,” said a spokesperson at Shanghai Rinnai, a Sino-Japanese joint venture specializing in kitchenware and water heaters. “Sales were a pleasant surprise across all product channels, thanks to the national subsidy.”
He added, “The trade-in program this year had very positive impact on Rinnai products. It boosted consumers’ desires to upgrade and increased our brand exposure.”
The program also gave impetus to Rinnai to “accelerate our own green transformation to fit subsidy requirements and to become more competitive,” the company spokesman added.
This year, Rinnai moved its 20-year-old exhibition store on Nanjing Road to a much larger space in Xuhui District, and built a 1,000-square-meter flagship store offering an “immersive” housing experience.
The trade-in program has also been a big boost for efforts across China to replace outdated elevators in apartment complexes.
China Central Television recently reported that about 900,000 of over 11 million elevators in use in China are 15 years or older. Upgrading old elevators in residential areas is a complex process involving getting residents signed up and arranging financing.
In September, the central government announced plans to upgrade more than 40,000 old elevators by the end of this year. Provincial governments followed suit with their own plans.
In Shanghai, about 40,000 elevators, or 56 percent of all elevators, are 15 years or older. Districts in the city had been working in past years to subsidize replacements. The trade-in program has allowed subsidies to be raised, lowering the contributions residents have to pay.
Government trade-in policy has helped Marohn TK Elevator Co increase revenue, expand business and lift brand profile.
For Marohn TK Elevator Co. a joint venture with Germany’s ThyssenKrupp Elevator, subsidies have led to higher sales.
“The program helped companies like us increase revenue, expand our business and lift our brand profile,” Marohn TK said. “Shanghai’s district governments are very active in promoting the program, which is helping consumers improve the quality of their lives.”
The company said it has a positive outlook for China’s market in the next few years, despite increasing market competition.
“With the combined effects of new and existing policies, China’s long-term upward growth track hasn’t changed,” the company concluded. “The government is also vowing to implement more pragmatic measures to support private companies, build a better business environment and push for high-quality development.”
Marohn TK added, “In our industry, the trade-in program has attracted many companies to compete and pushed them to improve product quality, technical levels and services, which means huge opportunities for competitive businesses in the next few years.”
