MNI INTERVIEW: China Trade-ins To Boost Consumption - MOFCOM's Xu

China’s Ministry of Commerce large-scale consumer goods trade-in programme alongside related fiscal and credit support will generate over CNY1 trillion of domestic demand by boosting automobile and household goods consumption, consolidating economic recovery, a high-ranking official told MNI.

MOFCOM will also facilitate the "old-for-new" programme for household appliances and support house renovations and adaptations for the elderly, Xu Xingfeng, director-general of the department of market operation and consumption promotion at the Ministry, said in an interview. (See MNI INTERVIEW: China Consumption Key To Growth - Advisor)

Authorities will encourage banks to adjust the maximum lending ratio for automobile loans accordingly and direct insurance companies to enhance offerings for cars, he added, noting the country will promote more EV charging infrastructure, parking and smart transportation.

China will make efforts to double the volume of scrapped vehicles in 2023 by 2027, increase secondhand car transactions by 45% and recycle 30% more discarded household appliances, according to the plan issued by the State Council last month.

While authorities estimate the incentives to trade-in and renew cars and appliances, particularly those with improved energy-saving and technical standards, and Chinese- or foreign-made new energy vehicles, could increase domestic demand by over CNY1 trillion, the Bank of China Research Institute predicted a more modest CNY210.9 billion-CNY629.3 billion, stimulating GDP growth by about 0.16-0.5 percentage points.

CONSUMPTION KEY

According to the National Bureau of Statistics, final consumption expenditure contributed 82.5% to economic growth in 2023.

Xu said the Ministry will diversify consumption via a greater emphasis on e-commerce, green and smart products. Expanding services consumption will act as a new driver for domestic demand and economic growth, he added.

The NBS data showed the proportion of residents' expenditure on service consumption reached 45.2% of total consumer spending in 2023 and contributed 67.5% to overall consumption growth. In Q1 2024, service retail sales increased by 10% y/y, higher than the 4.7% expansion of the total retail sales of consumer goods.

OPENING UP

China will continue to open its market to attract international consumer goods and services providers, Xu stressed. (See MNI INTERVIEW: China EM Trade To Rise, Despite Western De-risking)

More foreign companies will have access to service sectors, including telecommunications and healthcare, he said, noting the country will accelerate the development of free trade zones to promote imports. Authorities will create more favourable conditions for international trade by improving payment facilities and facilitating business visits to China, he continued.

Trade shows will also work as display and transaction platforms for introducing more consumer goods from various countries, he said, highlighting the China International Consumer Products Expo, which managed to attract overseas brands and domestic buyers.(See MNI INTERVIEW: China Trade To Hit CNY44-45 Trillion In 2024)