China Bets on Kitchen Appliances and Trade-In Schemes to Revive Flagging Economy

In an effort to combat its sluggish economy, China has introduced new policies encouraging consumers to trade in older products for discounts of up to 20% on new goods. The scheme has expanded to include household appliances such as microwave ovens, rice cookers, dishwashers, and water purifiers. Previously, the trade-in program covered items like televisions, mobile phones, tablets, smartwatches, and electric vehicles.

The initiative is part of broader efforts by the Chinese government to stimulate consumer spending, address weak demand, and tackle other economic challenges.

Expanding the Trade-In List to Stimulate Demand

On Wednesday, the Chinese government confirmed that it had allocated 81 billion yuan (£8.9bn, $11bn) for the consumer goods trade-in program this year. The aim is to boost sales of high-ticket items like home appliances and cars.

The programs, which began in March, have already had a noticeable impact, with increased sales in certain product categories. According to the Ministry of Commerce, these measures have had "visible effects" in stimulating purchases of large items, such as kitchen appliances and cars.

Weak Consumer Demand and Challenges to Economic Recovery

Despite these efforts, China's economy remains under pressure. The country continues to grapple with weak consumer demand and an ongoing property crisis. Many businesses and households are hesitant to spend due to economic uncertainty, affecting the country’s growth prospects.

China’s Ministry of Commerce has expressed confidence that the trade-in programs will continue to encourage domestic spending. However, economists have raised concerns about the broader effectiveness of these measures. Dan Wang, a China-based economist, noted that while the programs have boosted specific sales, they are insufficient to address the underlying challenges affecting the broader economy.

Economists Question the Long-Term Impact

Economists like Harry Murphy Cruise, head of China economics at Moody’s Analytics, argue that while the trade-in schemes have supported sales of certain goods, they have not generated a significant increase in overall consumption. In particular, Murphy Cruise suggests that the policy is not enough to reverse the weak spending patterns seen across China in recent months. He stated, "While it has supported sales of some listed goods, such as cars and appliances, it hasn’t driven an overall uptick in spending."

Global Challenges and China’s Economic Goals for 2024

China’s economy faces external pressures as well, particularly from international trade disputes. The threat of tariffs on Chinese products, particularly with the incoming U.S. administration under President-elect Donald Trump, has raised concerns for Chinese exporters. Trump has threatened to impose a 60% tariff on Chinese-made goods, which would further challenge the country’s trade sector.

In response, China’s leaders have emphasized the need to bolster domestic consumer spending. In December, a meeting of China’s top leadership highlighted the importance of "vigorous" measures to stimulate economic growth, particularly focusing on strengthening consumer demand.

Looking Ahead: China’s 2024 Growth Projections

China is set to announce its 2024 economic growth figures next week, with government officials predicting a target of around 5%. The announcement will provide further insight into the success of these measures and the country’s path toward economic recovery.

Will Trade-In Schemes Be Enough to Revive the Economy?

While China’s trade-in programs are a promising effort to boost consumer spending, the long-term effectiveness of these schemes remains uncertain. With challenges like weak demand, a struggling property sector, and potential global trade disruptions, the Chinese economy faces an uphill battle in 2024. However, the government’s continued focus on stimulating consumption will likely play a crucial role in shaping the country’s economic future.