(Bloomberg) -- China disclosed for the first time it’s earmarking 300 billion yuan ($41 billion) for an initiative to give a makeover to the country’s stock of industrial and household equipment.
As part of one of this year’s main stimulus programs designed to lift consumer spending, the central government will use funds raised by selling ultra-long special sovereign bonds this year for the overhaul, according to a document released Thursday.
About half of that money will finance subsidies for companies that buy new equipment, while the rest will go to local governments to enact various incentives for consumers to trade in products like cars.
“The foundation of a recovery in consumption still needs to be solidified,” Zhao Chenxin, vice chairman of the National Development and Reform Commission, the country’s top economic planning agency, said during a press briefing on Thursday. “I believe these measures will create a positive impact on consumption in the second half of the year.”
The program is similar to a “cash for clunkers” initiative seen in countries like the US in trying to coax consumers and businesses to spend more. But its impact on domestic demand has yet to be felt, as China reported retail sales growing in June at the weakest monthly pace since December 2022.
Xu Xingfeng, an official with the Ministry of Commerce, acknowledged at the briefing that consumption faced “great pressure” in the first half of the year.
To make the program more successful, the government expanded business areas that are supported by the equipment upgrade push to include sectors like energy. It lifted the size of subsidies for consumers who retire their old cars and buy new ones, and set a rebate level of 15% of the price tag for purchases of home appliances that meet certain energy efficiency standards.
All of the funds will be allocated by the end of August, and the government has simplified procedures of the program, according to officials at the briefing.
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