Green, smart goods boosted by trade-ins

China's trade-in programs, with greater emphasis on greener and smarter products this year, will better meet people's needs to upgrade their older models and further unleash the country's consumption potential, analysts said.

They say dedicated fiscal funds for this consumption-boosting initiative in 2026 could see an increase from the 300 billion yuan ($42.9 billion) recorded during the previous year, and the scope of these incentives to broaden beyond durable goods is likely to also encompass services consumption.

According to a notice issued by the Ministry of Commerce and other government departments in early January, consumer purchases of energy and water-efficient household appliances are eligible for subsidies of up to 1,500 yuan per item.

Eligible household appliances include refrigerators, washing machines, televisions, air conditioners, water heaters and computers. Subsidies for these items are set at 15 percent of the final purchase price after any discounts are applied.

Certain digital and smart products, including mobile phones, tablet computers, smartwatches and smart bands, are also covered, provided each item is priced at no more than 6,000 yuan. For this category, the subsidy is capped at 500 yuan per item.

Additionally, consumers who scrap old vehicles and purchase new ones can receive subsidies calculated as a proportion of the new vehicle's price, with the maximum subsidy capped at 20,000 yuan.

Earlier this month, China frontloaded 62.5 billion yuan of ultra-long term special treasury bonds as the first batch of funds to support trade-ins of consumer goods this year, said the National Development and Reform Commission, the country's top economic regulator.

China's consumption ratio — measured by household spending as a share of GDP — remains relatively lower than international peers, presenting a clear opportunity and pointing to substantial room for growth, said Wang Qing, chief macro analyst at Golden Credit Rating International.

China's household consumption accounted for 39.9 percent of the economy in 2024, marking a gap compared with developed economies, where the rate is typically 10 to 30 percentage points higher.

"Fiscal funds earmarked from the ultra-long-term bonds underpinning the trade-ins are expected to rise to 500 billion yuan in 2026, higher than the 300 billion yuan in 2025," Wang said.

Sales of consumer goods under China's trade-in program exceeded 2.6 trillion yuan last year, benefiting over 360 million people, data from the Ministry of Commerce showed.

Specifically, over 11.5 million automobiles, 129 million home appliances, 91 million digital products, 120 million home decor, kitchen and bathroom items, as well as 12.5 million electric bicycles were purchased through the trade-in program in 2025.

Analysts also pointed to the structure of spending as a key area for development, with the share of services consumption in China remaining notably lower than in advanced economies.

China is shifting from a goods-dominated consumption model to one balanced between goods and services, with demand for services such as culture, tourism, eldercare and childcare remaining robust, an official from the Office of the Central Committee for Financial and Economic Affairs said.

While demand for high-quality services is rising alongside higher incomes and demographic shifts, the current services provision capacity has yet to fully scale up to meet the surge, said Luo Zhiheng, chief economist and head of the research institute at Yuekai Securities.

To tackle this, the dedicated 500 billion yuan re-lending facility, established last year by the People's Bank of China — the country's central bank — should be fully leveraged to support market entities in enhancing both the quality and availability of services and eldercare provisions, Luo said.

Luo added that China's incentives to stimulate consumer spending could extend beyond durable goods to encompass essential service sectors like childhood education.

In late December, the Ministry of Commerce, along with the PBOC and the National Financial Regulatory Administration, released a document pledging stronger financial support for consumer spending.

In the document, financial institutions were encouraged to refine their services for consumption of big-ticket goods, while for the services sector, the document emphasized innovative financial products targeting industries such as eldercare, catering, tourism and education.