China’s plan to boost consumption by encouraging trade-ins has yet to show results | Real Time Headlines

BEIJING – China’s plan to stimulate consumption by encouraging trade-ins has yet to yield significant results, some companies told CNBC.

China announced in July Allocate 300 billion yuan ($41.5 billion) Expand existing trade-in and equipment upgrade policies with ultra-long-term special government bonds to stimulate consumption.

Half of it is used to subsidize the trade-in of cars, home appliances and other large consumer goods, and the rest is used to support the upgrade of large equipment such as elevators. Local governments can use ultra-long-term government bonds to subsidize certain purchases by consumers and businesses.

While targeted measures to stimulate consumption surprised analysts, they still require China cautious consumer Spend some money up front and have a used product to trade in.

Jens Eskelund, president of the European Chamber of Commerce in China, told reporters earlier this week: “Since the measures were enacted, we are not aware of any companies that have translated this into actual concrete incentives in China. .

“Our encouragement is that now we focus on execution to get visible, measurable results,” he said.

The chamber’s analysis found that the total budget amount for central government policies is about 210 yuan ($29.50) per capita. The group said in a report released on Wednesday that this program alone is unlikely to significantly increase domestic consumption, given that “only some of it will reach household consumers.”

Analysts are less optimistic about the extent to which the trade-in program will support retail sales.

Wang Tao, chief China economist at UBS Investment Bank, said in July that the new trade-in program could support the equivalent of about 0.3% of retail sales in 2023.

China’s August retail sales data will be released on Saturday morning. Retail sales grew 2% in June, the lowest level since the Covid-19 pandemic, while sales growth improved slightly in July, at 2.7%.

But new energy vehicle sales Soared nearly 37% Sales fell in July despite overall declines in passenger car sales, according to industry data.

Trade-in policy exceeds Double existing subsidies The purchase prices of new energy vehicles and traditional fuel vehicles are 20,000 yuan and 15,000 yuan respectively.

March and April, China has begun to roll out policies Extensive support for equipment upgrades and trade-in of consumer goods. Regarding the measures announced in late July, officials pointed out that 800,000 elevators in China have been in use for more than 15 years, of which 170,000 have been in use for more than 20 years.

Two major foreign elevator companies told CNBC in August that they had not yet seen specific new orders under the new equipment upgrade program.

Sally Loh, president of U.S. elevator company Otis’ China business, said: “The whole plan is still in a very early stage.” She said the company knew the total amount, but “as for the amount allocated to the elevator, it hasn’t really been clarified.”

“We do see that there is definitely a lot of interest from local government to ensure that these types of central government funds are deployed effectively to the residential buildings that are most in need of replacement,” she said, noting that the funding that has been announced “will really help solve the problem.” There are some financing issues that we think are of great concern to our customers.

Otis’ new equipment sales in China drop by double digits in second quarter earnings release. It did not break down revenue by region.

Finnish Elevator Kone reports revenue in Greater China A drop of more than 15% in the first six weeks It is expected to fall to 1.28 billion euros ($1.41 billion) in 2024, weighed down by the real estate downturn. This still accounts for more than 20% of Kone’s total revenue in the first half of the year.

“We’re really excited about this opportunity. We’ve been excited about this for a long time,” said Ilkka Hara, KONE’s chief financial officer. “This is more of a catalyst that enables a lot of people to do Out of choice.”

“I definitely see opportunities in the future,” he said. “How quickly it will happen, it’s hard to say.”

Hara noted that the new elevators can save more energy than older models and said that in addition to sales, Kone also plans to expand its elevator service business.

Central government policies may take time to be implemented locally. Several major cities and provinces only Details have been released over the past few weeks About how the trade-in program works for residents.

for AT updateRex Chen, the company’s chief financial officer, said the company operates a second-hand goods processing store and the ultra-long-term government bond program that supports trade-ins will not have a short-term impact.

But he told CNBC that the policy supports the long-term development of the second-hand goods market, and he hopes the government can provide more support for communities to establish trade-in kiosks.

ATRenew specializes in pricing and reselling select second-hand products — the company claims to have become Apple’s global trade-in partner last year.

Chen said trade-in volumes did increase in certain categories and regions, such as mobile phones and laptops in parts of Guangdong province.

According to ATRenew, since the new policy was released, trade-in orders from e-commerce platform JD.com have increased by more than 50% annually, but it did not specify the specific time.

—CNBC Sonya Heng contributed to this report.