China increases consumer subsidies to combat deflation, boost consumption
What's the story
Amid weakened household and business confidence, China is ramping up its efforts to boost consumption and fight deflation this year. The country's top economic planner and the Ministry of Finance have announced higher subsidies on a wider range of consumer goods. The move is part of a larger strategy to boost domestic consumption amid possible export challenges due to intensifying trade tensions with the US.
Subsidy expansion
Subsidies extended to tech products and home appliances
The subsidy program now offers a 15% discount on new mobile phones, tablets, and smartwatches under ¥6,000 ($818). However, the total benefit per person is limited to ¥1,500 per year with some restrictions on the number of goods one can buy. Further, the range of home appliances eligible for state support has been expanded from eight categories last year to 12 this year.
Corporate incentives
Industrial equipment upgrades and corporate benefits
The subsidy program also covers industrial equipment upgrades, with new agricultural machines being included this year. Companies in sectors such as electronic information and work safety are now eligible for these benefits. Zhao Chenxin, a vice chairman at the National Development and Reform Commission, highlighted that the program plays a key role in "expanding effective investment, boosting consumer demand, promoting green transformation, and improving people's livelihood."
Market response
Market reaction and future plans for subsidy program
Despite these measures, stock investors remained unimpressed with the CSI 300 Index of onshore shares dropping by 1.5% at mid-day break, primarily driven by information technology firms. Chinese stocks trading in Hong Kong also witnessed a similar decline. However, China plans to continue distributing ultra-long special sovereign bond funds among local governments to facilitate consumer subsidies under this program throughout the year.