Steps to Boost Domestic Demand in China

In a recent expo held in Nanning, a car participating in a trade-in program captured the interest of many potential buyers. China is taking significant measures to enhance large-scale equipment upgrades and support consumer goods trade-ins. With the world's second-largest economy facing various internal and external challenges, officials have placed a strong emphasis on boosting domestic demand this year.

To stimulate business investments and encourage consumption, the government plans to increase funding through ultra-long-term treasury bonds and expand the list of eligible items. These initiatives are designed to benefit more households and companies while providing a vital boost to the economy's recovery, according to experts.

Last year's initiatives have already shown their effectiveness in driving consumer demand, increasing investment growth, facilitating industrial upgrades, and supporting green initiatives, stated Zhao Chenxin, deputy head of the National Development and Reform Commission, during a press conference in Beijing.

By the end of 2024, retail sales of new energy passenger vehicles reached 11 million units. Additionally, equipment upgrades across key sectors in the country are projected to have surpassed 20 million units, as reported by the commission.

In the context of international trade tensions, particularly with the potential reimposition of tariffs on Chinese goods by incoming US President Donald Trump, enhancing domestic demand is crucial. Zhang Yongjun, secretary-general of the China Center for International Economic Exchanges, emphasized that fostering robust domestic demand will help secure China's advancement and modernization goals.

This year's strategy includes expanding the equipment upgrade program, focusing on advanced, intelligent, and environmentally friendly applications. The government has earmarked funds to subsidize loan interest, thus reducing financing costs for businesses.

Moreover, the support for consumer goods trade-ins has grown, with more items like smartphones, tablets, and smartwatches now eligible for subsidies. Last year's allocation of 150 billion yuan (approximately $20.5 billion) for the trade-in initiative resulted in a significant multiplier effect, generating 2.5 times more new consumption, according to Wang Qing, chief macroeconomic analyst at Golden Credit Rating International.

This year, the funding for the trade-in program is expected to double, reaching 300 billion yuan. This increase could potentially drive an additional 750 billion yuan in new consumption, leading to a notable 1.5 percentage point acceleration in the year-on-year growth of total retail sales of consumer goods in 2025.

The central government has also made an early allocation of 81 billion yuan for the consumer goods trade-in program in 2025. Funding decisions will consider various factors, including demographics, regional GDP, and the success of the previous year's trade-in program to ensure an appropriate distribution across provincial regions.

In particular, regions that performed well with trade-ins last year will receive a greater share of the funding, according to Fu Jinling, an official from the Ministry of Finance.

demand, economy, initiatives