In its own way, China says it wants to support certain types of consumer purchases. Relevant authorities announced on Thursday that special bonds equivalent to 300 billion yuan ($41.5 billion) will be used for trade-ins and equipment upgrades, a major expansion of existing programs. Ding Wenjie, global capital investment strategist at China Asset Management, said: “Compared with previous equipment upgrades and consumer goods trade-in policies, the new policy provides greater support (increased subsidy levels) and clear funding sources.” The management company said in the report. “The central government also bears a higher ratio (central:local=9:1), which will speed up policy implementation,” Ding said. “In addition to the previously announced automobiles and home appliances, the plan also covers more areas such as trucks, machinery, home decoration and smart home appliances.” She expects automobiles, industry and household appliances to benefit from it. The policy will at least double the purchase subsidies for new energy vehicles and traditional fuel vehicles to 20,000 yuan and 15,000 yuan per vehicle respectively. The policy also provides specific subsidies for home decoration and consumer purchases of home appliances such as refrigerators, washing machines, televisions, computers, and air conditioners. The document states that each consumer can receive a subsidy of up to 2,000 yuan for each product purchased in each category. Major Chinese home appliance stocks rose on Friday. Mainland China’s three largest brands in the category by transaction volume – Midea, Gree and Haier – rose about 5.8% to 8.3%. This contrasts with the modest rise in mainland China’s overall index. The issuance of NT$300 billion in ultra-long-term bonds is not a new allocation from the government, but a more detailed specification of the NT$1 trillion ultra-long-term bond plan announced earlier this year. Morgan Stanley analysts said in a report on Friday: “This amount exceeded market expectations; we expect equipment stocks to react positively.” Analysts said, “300 billion yuan is the largest equipment deal in the history of central finance Upgrade Subsidy”. Among the stocks they cover, they expect Inovance Technologies to be one of the few “to benefit the most from auto and/or appliance trade-in subsidies.” Despite slow growth in retail sales, Chinese authorities are refusing to hand out cash to consumers. Instead, Beijing has made clear that its focus is on building domestic technological capabilities. Even the 300 billion yuan figure is roughly divided into consumer-related trade-ins and enterprise-side equipment upgrades. “We believe China’s household consumption (150 billion yuan, equivalent to 0.3% of retail sales in 2023) and corporate capital expenditure will receive a considerable boost, but given that financial support for infrastructure may be smaller, the impact on GDP growth The overall impact is likely to be limited,” Wang, head of Asia economics and chief China economist at Tao Ruiyin Investment Bank, said in a report. The latest consumption measures come after China’s twice-a-decade Third Plenary Session, which usually sets the tone for long-term economic policy. A more immediate-focused Politburo meeting is expected later this month. “The plenary session proposed that ensuring and improving people’s livelihood during development is a major task on China’s modernization path,” said Tang Daliu, deputy director of Fitch Imperial’s corporate department. “With residents’ savings continuing to grow rapidly and consumption relatively sluggish… we expect that the Chinese government will increase investment in education, medical care, elderly care and other fields that are directly related to people’s livelihood and well-being, which will help eliminate residents’ worries and boost consumer confidence. Converting the current excess of household savings into consumption. —CNBC’s Michael Bloom contributed to this report.
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