China’s US$42 Billion Trade-In Program Spurs Consumer Spending Amid Economic Slowdown
- Rahaman Hadisur
- Jul 19
- 3 min read
Hadisur Rahman, JadeTimes Staff
H. Rahman is a Jadetimes news reporter covering Business

China’s ambitious US$42 billion (RM178.71 billion) trade-in programme is providing a much needed spark to sluggish consumer spending, even as concerns mount over the sustainability of its impact in a slowing economy. From smartphones to electric vehicles and household appliances, millions of Chinese shoppers are taking advantage of government subsidies to upgrade products temporarily lifting retail sales and boosting optimism.
In Tianjin, shopper Zhan Demi represents the new wave of consumers motivated by deep discounts and targeted subsidies. She cited the need to manage storage-heavy family apps and toddler photos as reasons for replacing her phone but it was ultimately the government programme that sealed her decision.
“I wanted to shear wool from the sheep,” Zhan said, using a popular Chinese idiom for seizing a good deal. She had already benefited from up to 20% discounts on an energy-efficient air conditioner and other appliances.
The trade-in initiative, modeled after America’s "Cash for Clunkers" programme, was expanded in 2025 with double the funding of the previous year. It now covers a wider range of goods, including smartphones, smartwatches, and tablets. Backed by special Treasury bonds, the initiative is one of Beijing’s most direct efforts to stimulate household spending.
Its early success is clear: retail sales in May grew 6.4%, beating economists’ expectations thanks to strong demand for electronics and appliances. However, that very success has forced several municipalities including Chongqing to pause or scale back subsidies to avoid prematurely exhausting their budgets. Officials have hinted at a second round of subsidies to resume later.
While short-term figures are encouraging, experts caution against over-optimism. Japanese investment bank Nomura forecasts that retail sales growth could slow by 0.4 percentage points in the second half of 2025, and nearly 1 percentage point in early 2026.
“The trade-in programme is helpful, but its effects might fade quickly,” said Zichun Huang, a China economist at Capital Economics.
Facing limits on traditional stimulus tools like infrastructure spending constrained by mounting local debt the Chinese government is shifting strategies. Alongside trade-in incentives, authorities plan to distribute annual cash payments of US$500 per child under three years old, aiming to ease household financial pressure and promote consumption.
Still, deep-rooted structural challenges persist. China’s high savings rate, underdeveloped social safety net, and anxiety over job security continue to weigh on spending habits. Many Chinese workers, particularly gig workers, lack comprehensive unemployment and injury insurance. Meanwhile, falling home values once seen as stable investments have left millions feeling poorer.
Zhang Dylan, a BYD auto salesperson, said consumer behavior has notably changed. “Three years ago, we had six-month waitlists,” he said. “Now, people are holding back. It’s too hard to make money.”
Retail workers report modest increases in sales. Xiaomi store staffer Wang Mingke noted monthly phone sales climbed to over 30 units from 20 before the programme though early in the rollout, the store saw sales hit 50 units.
“The subsidy gave people a reason to spend,” said Wang. “But the economic pressure is still there. When income drops, discretionary spending is the first thing people cut.”
As China looks to balance growth and social stability, officials, including President Xi Jinping and Premier Li Qiang, have ramped up rhetoric on the importance of domestic consumption. At the World Economic Forum in Tianjin last month, Li pledged to transform China into “a megasized consumption powerhouse.”
Whether the trade-in programme becomes a turning point or a temporary boost remains to be seen. For now, shoppers like Zhan Demi are seizing the moment while watching their wallets.
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