China is to subsidize more consumer products and boost funding for industrial equipment upgrades, ramping up a program to bolster domestic consumption in the face of growing headwinds for exports.
Consumers would qualify for a 15 percent subsidy for buying new mobile phones, tablets and smartwatches under 6,000 yuan (US$818) this year, according to an official notice published yesterday by the Chinese National Development and Reform Commission (NDRC) and the Chinese Ministry of Finance. The benefit is capped at 500 yuan for up to one device in each category.
The authorities would also expand the types of home appliances eligible for state support to 12 from eight last year to include products such as dishwashers and rice cookers, the notice said.
Photo: EPA-EFE
The two other new consumer goods covered by the initiative this year are microwaves and water purifiers. Consumers would also get more cash compensation from the government for spending on decoration materials to refurbish homes, the notice said.
China has made boosting consumption a higher priority this year as it looks to fight deflation amid subdued household and business confidence. Exports as a growth engine might also lose steam as trade tensions with the US would likely intensify with US president-elect Donald Trump returning to the White House later this month.
A trade-in subsidy for electric vehicles (EVs) and hybrids was also renewed. The cash-for-clunkers program gave a big boost to sales — especially of EVs and hybrids — after its introduction last year, with more than 3.7 million vehicles purchased under the program.
New agricultural machines have also been added under an initiative to subsidize industrial equipment upgrades. Companies in sectors such as electronic information and work safety are included to get the benefit this year.
NDRC Vice Chairman Zhao Chenxin (趙辰昕) said yesterday the program plays an important role in “expanding effective investment, boosting consumer demand, promoting green transformation, and improving people’s livelihood.”
Investors were unimpressed by the latest effort, sending stocks tumbling in the morning. They erased the losses briefly in afternoon trading on purchases by exchange traded funds known to be favored by the “national team” before falling again. The Shanghai Composite index barely moved at the close, while Hong Kong’s Hang Seng Index dropped nearly 1 percent.
The authorities would continue to distribute ultra-long special sovereign bond funds among local governments to help them hand out subsidies to consumers under the program this year, the notice said.
The central government has already extended 81 billion yuan to local authorities to support the program this year, senior Chinese Ministry of Finance official Fu Jinling (傅金玲) said at the briefing.
The authorities would also arrange funds raised from the sales of ultra-long sovereign special bonds to provide loan discounts for companies to upgrade to new equipment on top of the 1.5 percent compensation already offered by the central government, the ministry said.
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